Eye On Housing reports on the continuing credit crunch in the housing industry as regulations drive banks to tighten up.
Credit standards on loan applications for commercial real estate loans (CRE), which includes land development and construction, multifamily, as well as nonfarm nonresidential loans, tightened over the first quarter of 2016. Moreover, the pace of tightening in each of these types of CRE loans has progressively grown over the past year. More specifically, banks indicate that tightened lending standards over the past year has focused on policies related to loan-to-value ratios and debt-service coverage ratios.
According to the most recent iteration of the Federal Reserve Board’s Senior Loan Officer Opinion Survey (SLOOS), covering the first three months of the year, a net share of 25% of senior bank officers reported that standards at their bank had tightened on construction and land development loans over the quarter while a net share of 36% reported that lending standards on loans for multifamily residential properties tightened. A net share of 12% reported that lending standards on nonfarm nonresidential loans tightened.