Banks Loosening U.S. Mortgage Standards: Chart of the Day

Perhaps more U.S. banks than at any time in two decades are making it easier to qualify for a mortgage.

The CHART OF THE DAY shows the net share of banks telling the Federal Reserve that they’re tightening standards in the home-loan market. In the central bank’s July survey of senior loan officers released last week, the net percentage for prime mortgages was negative 18.3 percent, by far the most loosening since it started asking the question by loan-quality category in 2007. It was also greater than the highest net share of banks easing in “all” mortgages in the 1990s or 2000s.

Still, lenders have a long way to go before they unwind the restrictions they imposed in the wake of the global financial crisis that risky home loans helped to create. The current trend is mainly about “small tweaks around the edges,” according to JPMorgan Chase & Co. mortgage-bond analysts.

“The magnitude of tightening during the crisis was so extreme that it dwarfs recent changes,” the analysts led by Matt Jozoff and Brian Ye wrote. And, “just because a large percentage of survey respondents said that they were loosening standards doesn’t mean that they were loosening them by a large amount.”

Banks are getting less stingy as home prices rise and the Fed’s stimulus sparks demand for higher-yielding assets. Business is also slowing after a rise in interest rates, and Fannie Mae and Freddie Mac have also been seeking to reduce banks’ concerns that they’ll be forced to buy back loans they’ve sold to the U.S.-backed firms if the debt sours.

A separate credit availability index created by the Mortgage Bankers Association shows how things aren’t nearly as loose as during the housing boom, when -- as an expression in the industry went -- if you could fog a mirror, you could get a loan. While the group’s measure climbed to 116.4 last month from 100 in March 2012, it approached 900 in the mid-2000s, signaling borrowing conditions were about nine times as easy.