A new Office of Comptroller of the Currency (OCC) survey will give home builders and Realtors more reason to complain that banks are continuing to tightened their underwriting standards and choke off credit to homebuyers.

The annual OCC survey shows that 40% of the largest national banks tightened their underwriting standards on residential mortgages during the past year ending in February.

Only 8% of the 54 national banks in the 2011 survey eased their underwriting standards during that period and 52% left them unchanged.

The easing by the four national banks "centered on collateral requirements, pricing, score card cutoff, and debt service requirements," OCC said in a report released on Thursday.

These assessments of credit underwriting standards are made by OCC examiners, not the banks.
The subprime meltdown prompted 56% of national banks to tighten their credit standards in 2008 and 73% tightened in 2009.

In the 2010 survey, OCC found the 5% of the banks eased their credit underwriting standards and 59% tightened. So it appears the tightening has crested but banks continue to be reluctant to lend.

A Consumer Financial Protection Bureau (CFPB) official told a Mortgage Industry Diversity Conference that lending standards are tight, except for the low downpayment programs backed by the Federal Housing Administration and Department of Veterans Affairs.

"Except for VA and FHA loans, it is hard to get a mortgagee without a sterling credit score and downpayment of at least 20%," CFPB assistant director Patricia McCoy said Friday morning.
She noted the CFPB is looking at "constructive" ways to improve access to credit that are consistent with sound lending practices.

"We are busy analyzing how to keep mortgage rules as flexible as possible while fulfilling our mandate to require appropriate consideration of repayment ability," she said.

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