Fed Survey: Tighter Credit Environment Dings Auto Loan Market

Bankers continued tightening credit for business loans and auto loans in the last three months while they continued to ease credit standards slightly in their home mortgage and consumer loan portfolios, according to the Federal Reserve’s latest senior loan officer survey released today.

A net 8.5 percent of bankers said they had tightened standards for large and mid-sized firms in the previous quarter, down from the previous report, while 7.1 percent said they tightened for smaller businesses, up slightly from the previous quarter. Significantly higher net percentages said they had tightened standards on a range of commercial real estate loans, with 44.3 percent saying they tightened on CRE multifamily loans and 31.4 percent tightening on construction or land development loans.

Industry-specific problems and a less-favorable economic outlook were fingered as the main reasons for tightening. More than two-thirds cited industry-specific problems, three-quarters identified economic uncertainty and a little over half cited reduced risk tolerance as a very or somewhat important consideration. Small net percentages reported that demand is stronger for C&I and CRE loans to firms of all sizes.

Meanwhile, 11.5 percent reported easing standards on GSE-eligible mortgages, as well as jumbo loan types. The majority of respondents saw stronger demand for GSE-eligible mortgages. More loan officers reported easing standards on consumer installment loans and credit cards but a net 8.1 percent tightened standards on auto loans. Trends in auto loan terms were mixed; unlike in previous surveys, lenders were holding steady extended maturities, down payments and minimum credit scores, while a net 11.2 percent tightened rate spreads.