WASHINGTON — More banks are tightening lending standards on home mortgages and other consumer and business loans as a deepening credit crisis exerts a heavier toll on the economy.
The Federal Reserve said Monday the percentage of banks reporting tighter lending standards rose across various loan types in its July survey. In April, the central bank had found that the percentage of banks reporting tighter lending standards was already near historic highs.
The new survey, conducted in early July, found that about 75 percent of the banks surveyed indicated they had tightened their lending standards for prime mortgages. That was up from about 60 percent of banks that said they were tightening lending standards for prime mortgages in the previous survey.
The Fed’s July survey covered 50 banks that hold about 80 percent of the residential mortgages on the books of all commercial banks.
Out of this group of 50 banks, 32 said they were still originating so-called nontraditional home mortgages. Among these 32 banks, about 85 percent said they had tightened their lending standards, up from 75 percent that said they were tightening lending standards for nontraditional mortgages in the April survey.
The Fed defines nontraditional mortgages as adjustable-rate mortgages with multiple payment options, interest-only loans and “Alt-A” mortgages that require limited verification of income.
The Fed survey found that only seven of the 50 banks said they were still participating in subprime mortgages, loans made to borrowers with weak credit histories. Of those seven, six said they had tightened lending standards on subprime loans, with only one saying it had left standards basically unchanged for subprime loans.
