Banks Continuing To Tighten Mortgage Requirements

Washington, DC, May 6, 2008--The Federal Reserve said Monday that more banks are tightening lending standards on home mortgages and other types of loans in response to a spreading credit crisis.

The Fed said the percentage of banks that reported tighter lending standards was near historic highs for nearly all lending categories.

The April survey found that nearly two-thirds of banks surveyed had tightened lending standards on traditional home mortgages with 15 percent saying standards had been tightened considerably.

The survey also found that the tougher standards extend consumer debt such as credit cards and home equity lines of credit.

The credit crisis began last year with rising defaults in the market for subprime loans extended to borrowers with weak credit histories.

As losses have accumulated, more banks have grown reluctant to make loans and have been tightening up on standards.

The survey found that only nine banks are currently making loans in the subprime category and of that group, 78 percent had tightened lending standards either considerably or somewhat.

About 55 percent of banks reported tougher standards on business loans, up from about 30 percent in the previous survey in January, the Fed reported.