Fed Says Banks Tighten Lending Curbs for Consumers, Businesses
Started by stevejhx
almost 18 years ago
Posts: 12656
Member since: Feb 2008
Discussion about
Aug. 11 (Bloomberg) -- The Federal Reserve said more banks tightened credit standards for consumers and business borrowers since April as defaults and delinquencies on home loans climbed. ``When the Fed started to cut rates, mortgage rates and other rates were actually lower than they are today,'' former San Francisco Fed Bank President Robert Parry said before the report. ``To say that things are... [more]
Aug. 11 (Bloomberg) -- The Federal Reserve said more banks tightened credit standards for consumers and business borrowers since April as defaults and delinquencies on home loans climbed.
``When the Fed started to cut rates, mortgage rates and other rates were actually lower than they are today,'' former San Francisco Fed Bank President Robert Parry said before the report. ``To say that things are easier in many areas of credit would be mistaken.''
The Fed has reduced the main lending rate 3.25 percentage points over the past 11 months to 2 percent. Still, rates on a 30-year mortgage stood at 6.52 percent Aug. 7, nearly unchanged from 6.59 percent a year earlier, according to data from Freddie Mac.
Reluctant to Lend
Banks may be reluctant to lend against housing collateral that is falling in value. Home prices in 20 U.S. metropolitan areas dropped 15.8 percent in May, the biggest decline since record keeping began in 2001, according to the S&P Case-Shiller Home-Price Index.
About 75 percent of U.S. banks surveyed indicated they tightened standards on prime mortgage loans, up from 60 percent in the previous survey, the Fed said.
Of the 32 banks that originate non-traditional mortgage loans, about 85 percent reported tighter lending standards, up from 75 percent in the prior survey, the Fed said.
Increased Loan Rates
Most banks increased loan rates over their cost of funds for commercial and industrial borrowing, according to the central bank. The proportion of banks raising such rates rose to a net of 80 percent compared to 70 percent in the April survey, the Fed said.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aY8Mbv9oNHzw&refer=home
Of course this doesn't affect Manhattan.
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Response by ritchi
almost 18 years ago
Posts: 61
Member since: Aug 2008
What the heck do you mean that this doesn't affect Manhattan?
Everything will make a difference on the margin.
Just keep in mind that these issues will make more difference outside of Manhattan and one thing, among many, that Manhattan has going for it is that if it gets cheaper, those who were seeking outside of Manhattan will instead seek out Manhattan.
Ignored comment.
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Response by serge07
almost 18 years ago
Posts: 334
Member since: Aug 2008
ritchi, I think Steve was being facetious.
Tight lending standards affect all real estate. Larger down payments will be required and the appraisals will be more rigid than in the past. Sounds like the mid-90s to me when getting a loan on Manhattan real estate was no walk in the park. I know, I was there. :)
The trends in the commercial lending market are aren't much better and perhaps worse.
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Response by bugelrex
almost 18 years ago
Posts: 499
Member since: Apr 2007
serge07
Can you give us an idea of how different it was in the mid-90's..
E.g. Co-ops still required 20% down and controlled Debt to Income.. so you had to least pass this test.
What were banks looking for in the mid-90's that they ignored in the last 5 years (bonuses, stock options as income ?)
Or are you referring to the Manhattan condo market which in my opinion is FLOODED with speculators who can't afford to hold..
Ignored comment.
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Response by serge07
almost 18 years ago
Posts: 334
Member since: Aug 2008
bugelrex, the difficulty I had was with the NY major banks that were quick to approve our credit but not the the apt. We finally found a savings & loan that approved the loan but only with 30 year fixed term (we wanted 15) and not at a terrific interest rate. That was for a two bedroom co-op, great location on the Upper East Side in 1996. The building's down payment requirement was 25%.
At that time, Manhattan real estate had been hammered during the previous 4-6 years and banks were very conservative in their lending practices. In addition, many financial institutions had failed so competition was on the weak side. Perhaps were weren't rich enough for their blood but we were a strong credit, had more than ample savings, zero debt & two very decent jobs.
I'm not familiar with the condo situation during that time as they were not too many around then.
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Response by serge07
almost 18 years ago
Posts: 334
Member since: Aug 2008
As to bonus, the bank & the co-op board would only include in the income calculation if I provided a letter from my employer stating a guaranteed minimum. Otherwise, it was raw salaries only and very importantly, the balance sheet.
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Response by stevejhx
almost 18 years ago
Posts: 12656
Member since: Feb 2008
"I think Steve was being facetious."
Impossible.
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Response by ESueCho
almost 18 years ago
Posts: 58
Member since: Apr 2008
has anyone figured out that EddieWilson and Stevejhx are the identical person?
Same positions
Same style of posting a negative article as worthy of its own discussion topic
Same argument style
Same style of rebuttal, interspersing the original quote and his response
Same claim to have worked at an investment bank, but seemingly not in the investment banking group itself
Same language style and pedantry related to language
Same self-corrections of their own posting
Same imperfect ability to do math
Same level of anger
Same reference to "they" and "them" as out to get people who don't think real estate is going up
what else is the same ... anyone care to point it out?
What the heck do you mean that this doesn't affect Manhattan?
Everything will make a difference on the margin.
Just keep in mind that these issues will make more difference outside of Manhattan and one thing, among many, that Manhattan has going for it is that if it gets cheaper, those who were seeking outside of Manhattan will instead seek out Manhattan.
ritchi, I think Steve was being facetious.
Tight lending standards affect all real estate. Larger down payments will be required and the appraisals will be more rigid than in the past. Sounds like the mid-90s to me when getting a loan on Manhattan real estate was no walk in the park. I know, I was there. :)
The trends in the commercial lending market are aren't much better and perhaps worse.
serge07
Can you give us an idea of how different it was in the mid-90's..
E.g. Co-ops still required 20% down and controlled Debt to Income.. so you had to least pass this test.
What were banks looking for in the mid-90's that they ignored in the last 5 years (bonuses, stock options as income ?)
Or are you referring to the Manhattan condo market which in my opinion is FLOODED with speculators who can't afford to hold..
bugelrex, the difficulty I had was with the NY major banks that were quick to approve our credit but not the the apt. We finally found a savings & loan that approved the loan but only with 30 year fixed term (we wanted 15) and not at a terrific interest rate. That was for a two bedroom co-op, great location on the Upper East Side in 1996. The building's down payment requirement was 25%.
At that time, Manhattan real estate had been hammered during the previous 4-6 years and banks were very conservative in their lending practices. In addition, many financial institutions had failed so competition was on the weak side. Perhaps were weren't rich enough for their blood but we were a strong credit, had more than ample savings, zero debt & two very decent jobs.
I'm not familiar with the condo situation during that time as they were not too many around then.
As to bonus, the bank & the co-op board would only include in the income calculation if I provided a letter from my employer stating a guaranteed minimum. Otherwise, it was raw salaries only and very importantly, the balance sheet.
"I think Steve was being facetious."
Impossible.
has anyone figured out that EddieWilson and Stevejhx are the identical person?
Same positions
Same style of posting a negative article as worthy of its own discussion topic
Same argument style
Same style of rebuttal, interspersing the original quote and his response
Same claim to have worked at an investment bank, but seemingly not in the investment banking group itself
Same language style and pedantry related to language
Same self-corrections of their own posting
Same imperfect ability to do math
Same level of anger
Same reference to "they" and "them" as out to get people who don't think real estate is going up
what else is the same ... anyone care to point it out?