Commercial banks eased standards for residential mortgage loans to meet a sharp increase in demand in the second quarter, the ""Federal Reserve"":http://www.federalreserve.gov/ reported Monday in its quarterly survey of bank lending standards.[IMAGE]
And, at the same time, a separate report Federal Reserve Report indicate the total amount of residential mortgage loans on commercial bank balance sheets dropped $1.65 billion in the same period to $1.57 trillion.
According to the quarterly survey, a net 52.5 percent of bank officers responding to the Senior Loan Officer Opinion Survey reported increased demand for traditional mortgage loans in the second quarter, compared with a net 30.2 percent reporting stronger demand in the first quarter when residential loans on commercial bank balance sheets rose $44.4 billion.
According to the survey though, an equal; percentage of banks reported easing and tightening lending standards compared with the first quarter when a net 1.9 percent of survey respondents reported tightening loan standards.
Also, according to the survey, a net 37.0 percent of respondents said demand for non-traditional residential mortgage loans was increasing compared with the first quarter when 23.1 percent of respondents said demand for non-traditional residential mortgage loans was increasing.
The loans officers' survey said a net 11.1 percent of respondents reported tightening lending standards for non-traditional residential loans in the second quarter compared with 11.5 percent who reported tightening standards for similar loans in the first quarter.
The net percentage tightening standards was far lower than in had been immediately after the onset of the recession when a net 52.9 percent of loan officers reported tightening standards on traditional residential loans and 84.2 percent reported tightening standards on non-traditional loans.[COLUMN_BREAK]
The loan officers surveyed reported easing standards on other types of lending:
├â┬ó├óÔÇÜ┬¼├é┬ó A net 9.5 percent said they were easing standards on commercial and industrial (C & I) loans to large and middle-market firms in the second quarter compared with a net 6.9 percent in the first quarter
├â┬ó├óÔÇÜ┬¼├é┬ó A net 4.9 percent said they were easing standards on C & I to small firms in the second quarter; a net 1.8 percent reported easing standards in the second quarter,
├â┬ó├óÔÇÜ┬¼├é┬ó A net 7.9 percent of loan officers said demand for loans by large and middle-market firms increased in the second quarter compared with 31.0 percent of lenders who reported increasing demand in the first quarter. An equal percentage of loan officers reported increasing and decreasing demand from small firms in the second quarter compared with a net 21.8 percent who reported stronger demand in the first quarter.
├â┬ó├óÔÇÜ┬¼├é┬ó A net 10.9 percent of banks responding said they were easing standards on credit card loans in the second quarter, almost unchanged from the 11.6 percent who said the same thing in the first quarter. A net 11.1 percent of banks reported stronger demand for credit card loans in the second quarter compared with 17.5 percent in the first quarter.
├â┬ó├óÔÇÜ┬¼├é┬ó A net 22.8 percent of respondents said they eased standards for auto loans in the second quarter with a net 33.3 percent reporting an increase in demand for auto loans. In the first quarter, a net 17.3 percent of lenders said they eased auto loan standards while 35.3 percent reported an increase in demand.
The survey asks bankers whether demand is increasing, decreasing or remaining the same and similar questions for lending standards reporting the results using a diffusion index: subtracting decreasing or unchanged demand from increasing and the percentage of respondents easing or not changing standards from those reporting tightening standards.
Overall the report suggests an increased willingness of commercial banks to lend, despite what appear to be consumer strains with stagnant income growth and relatively few new jobs. During the second quarter, the nation added 219,000 payroll jobs compared with 677,000 in the first quarter. Employment ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô the number of people working ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô increased 381,000 in the second quarter compared with an increase of 1.24 million in the first quarter. Aggregate weekly earnings rose about $515 billion in the second quarter compared with almost $1.1 trillion in the first quarter.
Banks continue to sit on cash reserves: $1.81 trillion at the end of the second quarter compared with $1.59 trillion at the end of the first quarter.