Banks Tighten Lending Standards

According to a Federal Reserve report, banks tightened standards for all types of loans in the second quarter. About 35 percent of senior loan officials said they tightened standards somewhat and none of the 51 responding banks said they loosened standards for prime mortgages. The rest said their standards for mortgages remained the same or were substantially stronger. Banks also told the Fed that they expected to maintain strict lending standards until at least the second half of 2010. “Most banks have woken up to the fact that there is a lot more risk in their loan books than they ever thought possible,” says Joel Conn, president of Lakeshore Capital LLC in Birmingham, Ala. That has caused many banks to reconsider their requirements for future lending, Conn says.
I am not pushing for the ‘free and easy’ lending from four or five years ago, what is really needed is a more pragmatic, level headed approach. The pendulum has swung to the other extreme and has now created some of its own problems. We work with a lot of local lenders that do phenomenal job and are bending over backwards to help their Realtor counterparts keep deals together