Lending Standards Eased Slightly Again in Latest Quarter

Banks loosened their lending standards on several types of loans during the past three months, according to the Federal Reserve’s survey of senior loan officers .

Those finding the easiest access to loan capital are large and medium-sized businesses, as well as car buyers. In the survey, which polled 55 domestic and 22 foreign banks, 21.8 percent of all banks said that they eased their lending standards for large companies in the third quarter from the second. And 20 percent said they had made it easier for auto loan applicants to get approved.

“In spite of the equity market volatility, it’s hard to say that overall financial conditions have tightened for Main Street,” Federal Reserve Bank of Atlanta President Dennis Lockhart said Monday as quoted in a Wall Street Journal article.

Easing of standards can take the form of lower credit score qualifications, longer loan terms, lower interest rates and fees, lower down payments or less collateral, or larger credit limits. And although 27 percent of banks reported that they were more willing to make consumer loans in the latest quarter compared with the second quarters, less than 10 percent of banks said their standards for approving credit cards and other consumer loans actually eased in the last three months.

Small businesses have also continued to feel the lending pinch, as only 7.8 percent of banks loosened their lending standards for commercial and industrial loans to small companies.

Residential mortgage loan standards were unchanged for the most part, as demand for home loans held steady at a low pace. In a special question, roughly 75 percent of respondents said they do not expect to see any growth in mortgage origination throughout the second half of 2011, sad news for a housing market in much need of some positive movement.

3 Responses to “Lending Standards Eased Slightly Again in Latest Quarter”

1. loan says:

   August 21, 2011 at 1:41 am

   Great articles thank you Amber
2. TeddyD says:

   September 25, 2011 at 8:06 am

   Getting a biz loan basically comes down to three questions: 1) does your business generate enough cash flow to repay the debt, 2) do you have enough collateral to repay the debt if cash flow dries up, and 3) do you have enough personal assets that could be liquidated to repay the debt if #1 & #2 are insufficient?

   If you have 2 out of these 3 you have a 67% chance of getting a loan approved. if you have all 3 you have a 100% chance of getting a loan. if you have 1/3 it’s a 33% chance. If you have 0, you can do the math…
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