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Survey: Lenders Hopeful for Credit Expansion

Lending availability may be in the swings of an expansion, as loan structures and demand loosen, leading to more financing opportunities in the broader economy, according to a ""second-quarter survey"":http://www.phoenixmanagement.com/newsroom/phoenix-survey-shows-relaxed-lending-standards released Wednesday by research firm ""Phoenix Management Services"":http://www.phoenixmanagement.com/. The survey posted hopeful signs for an erstwhile tight credit supply, even as it anticipates continued strains of volatility in home construction, real estate, and other markets.


The survey, titled ""Lending Climate in America,"" relied on anecdotal as well as quantitative research across a broad swath of lenders. Sections of the survey showed a rise in domestic lending by 6 percent, with 56 percent of lenders anticipating a surge in demand for financing. Most survey respondents reported feeling uncertain about the direction of the economy, giving trends over the next six months a ""C"" on an A-through-F scale.

""Lending standards are being relaxed,"" says Michael Jacoby, senior managing director and shareholder at Phoenix. ""Lenders in general have become and expect to continue to become more aggressive├â┬ó├óÔÇÜ┬¼├é┬ª thinking there is capital available at financial institutions who are in the business of lending money. They are out there seeking to find opportunities to put money to work.""

According to the data, 21 percent of survey respondents plan to loosen their loan structures over the next six months, posting a four-percentage increase from the past quarter. By the same token, lenders projecting tightened standards fell to 10 percent this quarter from 12 percent in the last, with 39 percent of survey respondents projecting reductions in interest rate spreads. Overall, the survey reports, 69 percent of lenders expect to hold steady with their current loan structures into the fourth quarter this year.

""The survey results are consistent with what we're observing in the market,"" Jacoby says. He adds that lenders continue to undertake ""pretty robust interest"" for financing opportunities, with loan officers at surveyed lenders and credit agencies offering up hope for a rise in aggressive lending behavior.


""There's a general sentiment out there in the marketplace that the lending community in general has reverted close to and some cases beyond where we were pre-recession,"" he says. ""The pendulum has swung back and, depending upon the situation and part of the country and minor variances, the pendulum is either pretty close to where we were or perhaps beyond.""

The survey yielded continuing signs of distress in pockets of the housing sector. Asked to identify which three industries lenders felt would shake from the most volatility over the next two quarters, 66 percent elected the construction industry as the most likely candidate, followed by real estate and the rental leasing industry. Answering a separate question about which factors would impact the economy the most, 41 percent pointed at the sluggish housing market, second only to energy prices.

Walter Molony, a spokesperson for the ""National Association of Realtors"":http://www.realtor.org/ (NAR), says the distress is consistent with existing-home sales figures from last week.

Reported by ""_MReport_"":https://themreport.com/articles/nar-june-existing-home-sales-fall-back-2011-07-20, those figures reflected upward-bound sales across the South and Midwest, a black-on-white match with declines in the Northwest and Northeast. Drop-offs in the condo sector paired with slow-to-moderate stabilizations in single-family homes portrayed a still-brittle housing sector, with overall declines to the tune of 0.8 percent in June. Single-family town homes, condominiums, and coops plunged at a seasonally adjusted rate from 4.81 million in May to 4.77 million in June.

Molony attributed the lackluster signs of recovery to last-minute contract cancellations, subpar appraisals, and the rejection of otherwise creditworthy borrowers by wary lenders.

He disagrees with the optimism of the Phoenix survey. ""We're seeing [lending] move in the wrong direction,"" he says, projecting that home sales would rise 15 to 20 percent if lenders went back to lending standards before the housing boom and subsequent recession. ""The market is under-performing given market intent.""

The ""_Wall Street Journal_"":http://www.xydo.com/toolbar/22922629-tighter_lending_crimps_housing_-_wall_street_journal reports that the nation├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ós top 10 mortgage lenders turned down 26.8 percent of loan applications in 2010, up from 23.5 percent the previous year, resulting in fewer home purchases nationally.

In a past interview with _MReport_, Molony said that ""lenders have only been willing to lend to the cream of the crop,"" creating a ""catch-22"" whereby wary banks keep their ledgers in the black but fail to drum up financing for homebuyers that would stabilize home prices and the broader economy.

He says the anecdotal data from the survey ""is a hopeful sign, we just need to see it manifest into action.""

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.

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