Bankers continued tightening credit for commercial real estate loans and consumer loans in the last three months while holding steady on other business loans and easing credit standards very slightly in their home mortgage portfolios, according to the Federal Reserve’s latest senior loan officer survey released today. A net 33.3 percent said they tightened on CRE multifamily loans; 25 percent tightened on construction or land development loans. Demand for CRE loans was moderately weaker or about the same, respondents said.
The tightening trend, consistent over recent quarters, is expected to continue through 2017; a net 29.8 percent said they expected to tighten standards on construction loans, while 44.1 percent said the same for multifamily CRE loans. Lenders generally expected to ease standards on commercial or industrial loans, particularly for smaller businesses. Nearly all bankers expected credit quality to improve or stay the same in 2017 for most categories, although a few bankers expected to see deterioration in their CRE portfolios.
However, in the previous quarter, on net bankers generally reported that they had left standards on commercial and industrial loans unchanged for large, midsize and small firms. Terms were slightly eased for larger firms; for example, a net 11.6 percent said they had increased the maximum size of credit lines, and 8.7 percent reported easing on loan covenants. Demand for C&I loans was largely unchanged. A less-favorable economic outlook was fingered as the main reason for those who tightened. For those who eased loan terms, 72 percent said more aggressive competition was at least a somewhat important factor.
Meanwhile, a slight 4.8 percent reported easing standards on GSE-eligible mortgages. Demand remained on net unchanged for GSE-eligible mortgages, while slightly less than 10 percent on net reported the weaker demand for government mortgages, Qualified Mortgage non-jumbo, non-GSE eligible loans and jumbo loans regardless of QM status. A net 8.3 percent tightened standards on credit card applications, up from the previous quarter, and 11.6 percent on net said they tightened on auto loans, with a focus on trimming maximum maturities, widening spreads, requiring higher down payments and tightening up credit score thresholds.