Loan Officer Survey Shows Tightening of Standards for Construction Loans and Mortgages
The results of the latest Loan Officer Survey, which reflects on banks’ lending practices in the first quarter of 2020, is consistent with other surveys and reports developed by other organizations in the banking and financial sector for the same time period. The survey shows that while the demand for homeownership is high, on the supply side, businesses consider real estate development, be it in single- or multifamily, to possess greater risk in current circumstances. The survey also points out that over 50% more banks are reporting that they have tightened the standards of CRE loans than those banks reporting they had loosened the standards. Demands for loans to finance commercial real estate development waned in the first quarter, as well. Banks also reported tightening standards on construction and land development loans, another category of commercial real estate lending. The effect was more pronounced in large banks, where the share of banks was more than 50%.
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