This comes as demand for CRE loans has weakened, with moderate net shares of banks observing reduced interest from borrowers. Interestingly, while domestic banks saw weaker demand, some foreign banks reported an uptick in demand for CRE loans during the second quarter.
While the residential real estate (RRE) market has shown some resilience, banks have also tightened lending standards for certain categories, such as jumbo mortgages and home equity lines of credit (HELOCs). This suggests that lenders are becoming more selective in their mortgage lending as economic conditions evolve.
While the overall trend is toward tighter lending, banks cited a variety of factors influencing their decisions, including a less favorable economic outlook, worsening industry conditions, and increased risk concerns.
“A significant net share of banks reported weaker demand for non-qualified mortgage (QM) non-jumbo mortgages, while moderate net shares of banks reported weaker demand for government, QM non-jumbo non-government-sponsored enterprise (GSE)-eligible, subprime, and non-QM jumbo mortgage loans, and modest net shares of banks reported weaker demand for GSE-eligible and QM jumbo mortgage loans. Meanwhile, banks reported that demand for HELOCs was basically unchanged,” the report noted.
Read next: What’s next as banks tighten non-QM guidelines?
