By Denny Gulino

WASHINGTON (MNI) – The Federal Reserve’s latest survey of credit officers
released Wednesday suggests banks again eased terms for credit card and auto
loans, and saw more demand for auto loans and both residential and commercial
mortgages.

The report overall suggested little fundamental change in credit terms
across the board, but at the margins “small percentages” reported business
borrowers saw eased lending standards over the past three months, in addition to
those borrowing for auto purchases and commercial and residential real estate.

Demand for commercial real estate loans appeared to increase “notably,”
according to about 45% of the banks responding.

For FHA insured mortgages in particular, a majority of U.S. banks told the
Fed their standards had tightened for borrowers with lower FICO scores. For an
FHA loan, a FICO score of 660 would be treated the same as it would have been
before the financial crisis in 2006, but not for those with lower scores.

For those with FICO scores as low as 580, three-fourths of the banks
suggested they would be less likely to approve a mortgage.

Mortgage refinancing through the government’s HARP program slackened a
little but the program still was accounting for more than 30% of refi
applications through early October.

“About 20% of banks anticipated that at least 80% of their bank’s HARP 2.0
applications would be completed,” the report said, with 45% of banks saying
completions could fall as low as 60%.

With six banks added to the survey panel, the latest report reflected
responses from 68 U.S. banks and 23 foreign-bank affiliates.

Reflecting perhaps some improvement in the continuing credit crisis across
the Atlantic, the survey reported that fewer domestic and foreign banks had
tightened their lending standards for European banks over the three months
through October.

“As in the July survey, domestic banks reported that they had experienced
little change in demand for loans from European banks and their affiliates and
subsidiaries,” the report said.

Although acknowledging that they were seeing less competition from European
banks, a “slight majority” said that lessened competition “did not appreciably
boost business.”

** MNI Washington Bureau: 202-371-2121 **

–email: dgulino@mni-news.com

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