Banks Moving to Ease Mortgage Approvals

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Have lenders turned the corner on lending standards in response to public and marketplace pressure?

About six percent of the nation's largest banks have loosened lending standards for prime mortgages in the fourth quarter, a sign that the lending environment may be improving as the 2012 home buying season nears. No bank tightened standards and 93.9 percent did not change standards at all during the quarter.

According to the latest quarterly survey of senior loan officers by the Federal Reserve, an equal number of banks raised or lowered lending standards for nontraditional mortgages and revolving Home Equity Lines of Credit (HELOC) loans. No bank in the survey tightened standards for prime mortgages.

Most loan officers (92.5 percent) expect the quality of prime mortgages to improve or stabilize around current levels in 2012. About the same percentage expect the quality of HELOCS either to stabilize at their current levels or improve this year.

From 2007 to 2010, lenders dramatically tightened mortgage lending standards, In late 2008, more than 70 percent of senior loan officers reported that they were tightening standards. The fourth quarter results are only the second time since the housing host that the Federal Reserve survey found more banks loosening standards than tightening them.