by Calculated Risk on 5/14/2007 03:52:00 PM

From MarketWatch: Banks tightening mortgage-lending standards: Fed

U.S. banks dramatically tightened their standards for approving individual real-estate loans in the first quarter of 2007, the Federal Reserve said Monday.

In particular, banks made it harder to get a subprime residential loan, the Fed reported. In its quarterly senior loan officer survey, the Fed said 31% of banks surveyed "considerably" tightened credit standards for subprime loans, while 25% of banks tightened those rules "somewhat." None eased standards.

For non-traditional residential mortgages, credit standards also went up. Eleven percent tightened those standards considerably, while 34% tightened somewhat, the central bank said. No bank surveyed eased standards for those loans.

Meanwhile, 15% of banks tightened credit standards somewhat for prime residential mortgages.

Here is the Fed Survey: The April 2007 Senior Loan Officer Opinion Survey on Bank Lending Practices. Notice that standards have also been tightened for Commercial Real Estate (CRE) loans.

Update: Add Graph of Net Percentage of Domestic Respondents Reporting Stronger Loan Demand - both C&I (Commercial and Industrial) and CRE (Commercial Real Estate). Note: for C&I, large and medium lender responses are average with small lender responses.

Click on graph for larger image.

Clearly loan demand is falling for all categories: residential, C&I and CRE. Standards are being tightened for residential (including some for prime loans) and CRE, but not for C&I - but the demand is falling for C&I anyway.