Senior loan officers who responded to the Federal Reserve's quarterly survey of bank lending practices in October reported that changes to bank lending standards for residential mortgage loans or home equity lines of credit (HELOCS) over the previous three months were on net minor.  Changes in demand for those loans was also largely around the edges.

Seventy-two banks responded to questions on prime residential mortgages, equally divided between "large banks," those with total domestic assets of $20 billion or more, and "other banks."  The number of respondents dropped significantly for questions regarding non-traditional mortgages (35 banks, 20 of them "large") and sub-prime mortgages.  Only six banks, again equally divided by size, answered questions in the latter category while 62 banks said they made no such loans.

There was, on net a bit of easing in standards for originating prime mortgages.  Nine large banks and one other bank reported moderate easing while moderate tightening occurred at 2 other banks.  Sixty banks reported that their lending standards were essentially unchanged over the period and none reported "considerable" easing or tightening.

Of the 35 banks that reported on non-traditional mortgage lending, a category of residential mortgages including adjustable-rate loans with multiple payment options, interest-only mortgages, and Alt-A products, 80 percent said their standards remained unchanged while 11 percent reported some easing.  Four of the six banks that made subprime loans also reported no change with one each reporting slight easing or slight tightening. 

Of the 72 banks who responded to questions about HELOC lending, 94 percent said standards were essentially unchanged over the three month period.  Five banks reported they had slightly eased their standards and one had slightly tightened them.

Lenders were asked whether, apart from normal seasonal variations, the demand for prime mortgages had changed.  Fourteen banks or 19 percent said that demand had been moderately stronger while to about the same number categorized the demand as moderately weaker.  Sixty percent called demand about the same.

Of those banks who originate non-traditional loans two-thirds called demand unchanged, and 26 percent called demand moderately weaker. Only one lender reported any change in demand for subprime loans, a moderate lessening.

There were 13 banks or 18 percent who thought demand for HELOC loans had increased moderately while 9 banks or 13 percent noted weaker demand.  49 banks called demand about the same.

In their analysis of the Senior Loan Office survey Wells Fargo Securities Economics Group said that the mortgage market needs a boost, calling demand underwhelming.  Despite the residential market showing further signs of easing its standards, fewer banks reported stronger demand for prime mortgages with nontraditional and subprime following suit. 

This, the Economics Group said, reflects "a persistent concern about the lack of household formation and absence of the first time homebuyer as renting continues to dominate.