Banks Report Stronger Residential Mortgage Demand

The second quarter saw substantially stronger demand for residential mortgage loans, according to the Federal Reserve’s latest senior loan officer opinion survey released today. More than half of banks reported stronger demand for GSE-eligible mortgages, and at least one in three banks said demand was higher in every other mortgage category: government; Qualified Mortgages that are jumbo or non-conforming; non-QM jumbo loans; non-QM and non-jumbo; and subprime. A small net percentage of banks tightened standards on conforming loans, while small handfuls of banks on net eased loan standards in the other categories. On net, banks neither tightened nor eased on QM jumbo and subprime mortgages.

Meanwhile, small net percentages of banks reported easing standards and terms for loans to large and midsize firms in the previous quarter, while a slightly larger percentage eased standards for small businesses. Banks that tightened cited the economic outlook, industry-specific problems and reduced risk tolerance as major factors. Nearly all banks that eased cited more aggressive competition as a somewhat or very important reason. Net percentages of banks reported weaker business loan demand from both large and small firms driven by decreasing capital investments and a decline in M&A financing needs.

A long-running trend toward tightening on commercial real estate loans continued, with modest net percentages tightening across all CRE categories. Banks reported moderately weaker demand for CRE loans, with the exception of multifamily loans. Standards for home equity lines of credit remained largely unchanged even as about a quarter of banks reported weaker demand. About 8.5% of banks reported tightened standards on credit cards, while on net 3.5% said they tightened standards for car loans and 9.3% said they tightened standards on other consumer loans. Double-digit percentages reported stronger demand for credit cards and auto loans.