Home Lending Still Tight Despite Banks Easing Rules on Lending

The Federal Reserve (Fed) is reporting that consumers found it easier to get credit cards and auto loans in the first quarter of 2012 as a result of banks loosening credit standards. But standards for home and business loans remain tight. The report was generally seen as a positive sign for the economy.

The Fed surveyed 58 domestic lenders and 23 U.S. branches of foreign banks between March 27 and April 10. The survey found that banks eased their standards for credit-card, auto, and other consumer loans, as well as loans for commercial real estate. In contrast, the standards for home mortgages and business loans were largely unchanged despite a pickup in demand.

In a special set of questions on residential real estate lending, about a third of the banks surveyed said they were participating in the Obama administration's Home Affordable Refinance Program, or HARP, and "were satisfying most demand." The Fed reported that about half of the banks had "very little participation" in the program.

Another reason for keeping home credit standards tight was the banks fear that they would be forced by mortgage giants Fannie Mae and Freddie Mac to repurchase troubled loans.