Since banks have been reducing their residential mortgage production, specialized non-bank companies have been stepping in to fill the void. And, according to the , banks aren’t planning to loosen their purse strings anytime soon. The group remains guarded about residential mortgages, but are starting to ease up on commercial real estate
(CRE) lending standards.
However, the survey showed some large banks reported having eased standards on closed-end mortgage loans, but respondents generally indicated little change in standards and terms for other types of loans to households.
Reported changes in loan demand were mixed. Most banks reported stronger demand for auto loans and weaker demand for nontraditional closed-end mortgage loans.
The pullback from banks has allowed nonbank lenders to boost their market shares. Specialized mortgage companies made 23% of all mortgage loans in the first six months of the 2014, up from 17% in the first half of 2013 and 11% in the same period in 2012, according to the Wall Street Journal.
On the business side, credit criteria for construction and land development loans have eased. The survey reported most banks have eased either standards or terms on CRE loans during the past three months, citing more-aggressive competition from other banks or non-bank lenders as an important reason for having done so. Smaller number of banks also attributed their easing to a more favorable or less uncertain economic outlook and increased tolerance for risk.
Since the housing crisis, the focus on high-quality loans has led to a tight credit market, especially among banks. The group has developed stricter standards in an effort to avoid recreating the scenario following the bust, when they had to repurchase tens of billions of dollars of bad mortgages they sold.