WASHINGTON (MNI) – The following is the second and final section of
the text portion of the Federal Reserve’s quarterly Senior Loan Officer
Survey, published Monday:

While fewer banks indicated that standards were at their tightest
levels for nonfarm nonresidential CRE loans and for multifamily CRE
loans, a majority of domestic respondents noted that their current level
of standards was tighter than the middle of its recent historical range
for these lending categories as well. Nearly 25 percent of foreign
respondents reported that their CRE lending standards had eased, on net,
over the past three months. Nearly all foreign banks indicated that
their current level of standards was at or tighter than the middle of
its recent historical range for all types of CRE loans. On net, more
than one-third of large domestic banks described demand for CRE loans as
having strengthened over the previous three months, while smaller banks
indicated that demand for such loans had remained about unchanged on
net. Of the foreign banks, about 15 percent noted an increase in demand.

Questions on residential real estate lending.

On net, banks reported that standards on residential real estate
loans were little changed for both prime and nontraditional loans over
the past three months. About 10 percent of respondents, on net,
indicated that they had eased standards on home equity lines of credit.
Demand for prime residential mortgages was reportedly little changed, on
net, while a small net fraction of banks indicated a weakening of demand
for nontraditional residential mortgages. For categories of residential
real estate lending including prime mortgages, nontraditional mortgages,
and home equity lines of credit, between about 10 and 15 percent of
respondents to the special question described the current level of their
lending standards as being easier than the middle of the range that
standards have occupied since 2005. Significantly larger fractions
indicated that standards were tighter than the middle of the range, and
the remaining respondents indicated that standards were near the middle
of the range.

Another special question queried banks about whether they expected
their originations of residential real estate loans, which were quite
weak, in the aggregate, over the first half of 2011, to increase or
decrease over the remainder of this year. About three-quarters of banks
reported that they expected the pace of their originations to remain at
about the same level through the rest of 2011; the remaining respondents
were roughly split between those that expected an increase and those
that expected a decrease in the pace of originations. A follow-up
question asked banks that did not anticipate any increase why they
expected their originations to remain flat or to decrease. All
respondents to this question cited reduced or unchanged demand from
creditworthy borrowers and almost all of these respondents also pointed
to unfavorable or uncertain forecasts for the broad economy and for
house prices. Another common but less frequently cited reason for the
expected lack of expansion in originations was increased concerns about
the effects of legislative changes, supervisory actions, or changes in
accounting standards. Questions on consumer lending.

Moderate net fractions of banks reportedly eased their lending
standards on consumer loans over the past three months. For credit card
loans and for consumer loans other than credit card and auto loans,
positive net fractions of banks reported having eased standards, but
these fractions were less than 10 percent. For auto loans, the fraction
that reported easing standards was more substantial, at nearly20
percent. For all three consumer loan categories, the net fraction of
large banks reporting an easing of standards was greater than the
corresponding fraction of other banks. With respect to loan terms, banks
eased some of the surveyed terms, on balance, but most banks reported no
change in most terms; in addition, the indicated easing in terms was
slightly more widespread for auto than for other consumer loans.

In the special questions on the level of standards, roughly
one-third of respondent banks described the current level of their
standards for auto loans as being tighter than the middle of the range
at their bank since 2005, while the corresponding percentages for

5 Board of Governors of the Federal Reserve System credit card and
other consumer loans were over 50 percent. For all three consumer loan
types, the majority of the remaining banks reported that the current
level of standards was near the middle of its recent historical range.

A moderate net fraction of banks reportedly experienced an increase
in demand for auto loans over the past three months. In contrast, the
reported demand for credit card and other consumer loans was about
unchanged on net.

This document was prepared by Mary Beth Chosak with the assistance
of Sam Haltenhof and Ben Rump, Division of Monetary Affairs, Board of
Governors of the Federal Reserve System.

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** Market News International Washington Bureau: 202-371-2121 **

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