Credit Quality to Retreat

Fed releases senior loan officer survey
By MortgageDaily.com staff
2/8/2006

Purchase mortgage demand contracted and credit quality may deteriorate, according to a new survey of bank loan officers.

The January 2006 Senior Loan Officer Opinion Survey on Bank Lending Practices reflected the responses of 56 domestic banks, the Federal Reserve announced today. The survey addresses changes in the supply of, and demand for, bank loans to businesses and households over the past three months.

On net, 44 percent of domestic banks reported weaker demand for mortgages to purchase homes, "a notably larger net fraction than in the October survey," when a quarter of domestic institutions reported such, the Fed said.

Eighty-four percent of all banks indicated that credit standards for approving purchase money applications remained basically unchanged in the past quarter, according to the survey report.

The Fed noted survey respondents indicated that, on balance, they expect loan quality on loans to households to deteriorate somewhat in 2006 from current very robust levels.

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