Banks Tighten Credit Standards

Banks and other lenders across the US have been tightening their credit standards and not just on mortgage loans. This tightening could worsen the already weakened economy from job loss and lowered consumer spending. Stricter standards make it harder for businesses to borrow what they need to grow, and consumers may have to cut spending as mortgage loan costs and credit card fees increase.

For an example of this tightening market Astoria Financial Corporation recently cut it’s maximum size of some home loans and stopped lending in 15 of the 44 US states it does business in. Large housing markets such as Florida, California, Michigan, and Ohio have deteriorated too far, it said.

According to a survey of senior loan officers by the Federal Reserve nearly all respondents expected credit quality to worsen, or at best stay the same in nearly every major lending area. The Federal Reserve’s survey shows how the credit crunch once centered on subprime mortgages has expanded into a wider array of loan products.

To read more about Mortgages other loans become harder to get head on over to CNBC.