U.S. banks reported tighter lending standards and terms on consumer loans other than credit card accounts, as well as tighter lending standards on prime, nontraditional and subprime residential mortgages, according to the Federal Reserve Board’s October 2007 Senior Loan Officer Opinion Survey on Bank Lending Practices. Survey results were released Monday.

Lending standards on credit card loans were, by contrast, little changed.

Demand for residential mortgages and consumer loans of all types had reportedly weakened over the past three months, the loan officers indicated.

About one-fourth of U.S. banks – up from about 10 percent in the July survey – said they had tightened their lending standards on consumer loans other than credit card loans over the past three months.

Some banks said they also had tightened lending terms and conditions on such loans; in particular, they reduced the extent to which such loans were granted to customers who did not meet credit scoring thresholds, and increased minimum credit scores and spreads of loan rates over their cost of funds.

A few banks indicated a diminished willingness to make consumer installment loans relative to three months earlier.

Lending standards and terms on credit card loans were little changed over the past three months although 10 percent of respondents reported they had widened spreads of loan rates over their cost of funds on such loans.

About 25 percent of U.S. institutions indicated that they saw weaker demand for consumer loans of all types, a slightly larger number than had said this in July.

Regarding mortgage lending, about 40 percent of respondents said they had tightened their lending standards on prime mortgages, compared with 15 percent that reported having done so in July.

Of 40 banks that originated nontraditional residential loans, 60 percent, vs. 40 percent in the July survey, said they tightened lending standards on such loans over the past three months.

Five of the nine banks that originated subprime mortgage loans said they tightened their lending standards on such loans, about the same that had said they did so in July.

Source: www.creditandcollectionsworld.com