A climate change is taking hold in bank boardrooms, which are slowly breaking up rigid credit policies that had seemed to ice over because of the financial crisis, according to new surveys.
The banking industry loosened the purse strings a bit for consumers on mortgages, car loans and credit cards last quarter, a report Monday from the Federal Reserve said.
The Fed said a trend of easing standards for business loans also is continuing -- good news for an economy facing federal budget cuts. The total value of loans at U.S. banks climbed about 3% in the last year to $7.3 trillion in June, according to a Fed report last week, with commercial and industrial lending leading the way.
The latest Fed survey, released Monday, reported that demand for loans had increased from both home buyers and businesses -- an indication of how the economy has improved. Demand for commercial loans had remained weak for years after the official end of the Great Recession in June 2009.
Credit standards for home loans have been easing slightly for five straight months, according to a separate survey conducted by the Mortgage Bankers Assn.
The trade group said Monday that the loosening in July stemmed mainly from greater availability of refinance loans allowing borrowers to cash out home equity, along with scattered increased offerings of loans with lower down payments and lower credit scores.
One prominent lending executive, Christopher M. George of CMG Financial in San Ramon, Calif., disputed the surveys' findings. George, residential president for the California Mortgage Bankers Assn., said he'd seen little evidence of looser home lending standards.
What's more, George said, he sees little pressure or justification for making home loans easier to get, because unemployment remains high, many local economies and governments are distressed, and the industry still has not fully adjusted to new regulations imposed after the financial crisis.
"I don't think many people out there are interested in making loans these days with a greater risk of default," George said. "We are not easing credit standards anytime soon. We're following the same standards ... generating a high-quality product."
The survey findings do appear more like cracks in the ice than a general melting.
The Fed, which questions banks' senior loan officers four times a year, said “a modest net fraction” had eased mortgage lending standards. That compared with a “large net fraction” that saw increasing demand for loans to buy houses.
“A moderate net fraction of respondents reported that they had eased standards on auto loans over the past three months,” the Fed said, “and small net fractions indicated that they had eased standards on credit card loans and other consumer loans.”