Loosening mortgage standards in the last few months failed to spur demand from borrowers, according to responses in the Federal Reserve's [1] latest Senior Loan Officer Opinion Survey [2].
Bank respondents reported less stringent lending criteria across most mortgage categories in January, with credit loosening most on GSE-eligible loans and jumbo loans falling under the Consumer Financial Protection Bureau's qualified mortgage (QM) standards.
On net, standards were also slightly looser for government-backed mortgages; non-jumbo, non-agency QM loans; and non-QM jumbo loans; though those changes were offset by the number of banks reporting tightening criteria.
For non-QM, non-jumbo loans, the same shares of banks (7 percent) reported tightening and easing. None of the handful of banks dealing in subprime mortgages reported any changes in credit standards.
Jibing with another recent survey from Fannie Mae [3], larger banks were about twice as likely to report easier standards in any given category as smaller institutions.
Despite the net easing in standards, banks reported that demand for mortgages was weaker overall in every category. Declines were most evident for GSE-eligible mortgages, with 32.8 percent of officers reporting "moderately weaker" demand, and subprime mortgages, with 37.5 percent of officers saying demand was weaker.