Of the 16 banks surveyed that said there were still in the subprime market, nine of them report having tightened their lending standards in the past three months. The Federal Reserve identifies the 16 banks as among the largest in the country, holding 57 percent of all residential loans at the end of March.
Survey respondents also reported tightening loan standards for so-called nontraditional mortgages, defined as adjustable-rate loans with multiple payment options, interest-only mortgages and loans with features such as limited requirements on income verification.
More than 10 percent of respondents said in the past three months they had tightened lending standards even on prime loans to borrowers with strong credit scores; none reported easing standards.
In an effort to bolster consumer confidence, The Fed joined with other central banks around the world to add $2 billion in overnight repurchase agreements, infusing cash into the banking system.
The crisis in the subprime market reflects an overall decline in the housing market following a boom period in which sales and home prices soared to record heights. With sales falling, prices stagnating and potential buyers having trouble getting loans because of tighter lending standards, these factors may combine to produce an even greater decline in the housing market, say economists.