Bad News for Lending

The Federal Reserve released The October 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices on November 9th. In short, a bad situation is getting worse.

Over the last 3 months, domestic banks have indicated that they have continued to tighten lending standards on all major types of loans to businesses and households.

The overall theme of the report is that a smaller portion of banks reported lending standards tightening then in previous surveys. However, the reasoning behind this is glossed over: some banks could be seeing a recovery or those banks could just be stumped as to how to tighten standards further. Both would create these numbers, and each has a significantly different outcome.


For those interested in a little light reading, the document is available here: http://federalreserve.gov/boarddocs/SnLoanSurvey/200911/

The document had one piece of interesting news. Apparently, Demand for residential mortgages may be turning around.
While this is only prime loans, we have a couple of quarters of positive data. This is very good news for housing, and a strong indicator that we may have hit a bottom for housing prices.