Getting a new credit card, car loan or small business loan got a bit easier over the past year, according to a new study by the Office of the Comptroller of the Currency. That’s good news for people who got the loans, and may be an encouraging sign that bankers believe the overall economy is still headed for a rebound.
But the trend may actually be worrisome, the comptroller found, since risky lending, especially in real estate, is what caused the recent recession.
“We need to remember that overly liberal underwriting standards contributed to extremely high credit losses,” Dave Wilson, the comptroller’s chief national bank examiner, said in a press release. “The pace of easing standards in products like leveraged lending is disconcerting and warrants close attention.”
Still, banks are not going on a hog-wild lending spree. Most banks either clamped down on real estate loans or kept in place their already-tight lending requirements, the report found, especially when it came to risky home loans for which borrowers put little money down. That’s partly because banks realize how much risk they already have on their books due to years of subprime lending, according to the comptroller’s office.
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“The greatest credit risk in banks is the ongoing impact of real estate values due to the significant volume of commercial real estate, residential real estate, and home equity loans in national banks’ portfolios,” the report found.
Among the 33 banks surveyed that offer loans to small businesses, 12% eased their lending requirements over the last 12 months, the report found. Another 55% left their requirements unchanged.
For lending directly to consumers, a quarter of the banks surveyed made it easier for people to obtain credit cards, the biggest increase in the last nine years (even as another 44% of banks clamped down on credit card lending). Rules for consumer loans—things like car loans and other loans to individuals—were loosened by 10% of banks, also the biggest loosening of standards reported in the last nine years, while 75% of banks surveyed said they kept their standards unchanged.
One type of lending really took off in the last 12 months: Indirect consumer loans, in which banks loan money to car dealers, payday lenders and other companies, which then make the actual loans to consumers. A whopping 37% of banks eased their restrictions on this type of lending, while 47% left their rules unchanged and only 16% tightened their belts.
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