Banks Tighten Lending Standards Further

Three years after the subprime loan meltdown touched off the housing recession, one out of every four banks continued to tighten lending standards and terms for prime mortgages in the third quarter, making it more difficult for buyers to qualify for and close on financing.

The number of banks tightening prime standards was a slight increase over the second quarters but not as great as the 30 percent of banks that tightened standards on nontraditional mortgages, according to the Federal Reserve's October 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices

Demand for most categories of loans weakened during the quarter, except for demand for prime mortgages, which stenghtened for the third consecutive quarter, reflecting stronger home sales. About 30 percent tightened standards on revolving home equity lines of credit, roughly the same as in the previous quarter.