OCC annual underwriting survey reveals tightening credit standards

The Office of the Comptroller of the Currency (OCC) conducted its 14th annual underwriting survey to identify trends in lending standards and credit risk for the most common types of commercial and retail credit offered by national banks. The survey covered the 12-month period ending March 31, 2008.

Commercial underwriting trends:
For overall commercial credit 52% tightened underwriting trends.
60% tightening underwriting in leveraged loans, 22% in asset backed loans, CRE commercial, CRE residential and Credit exposure to HF tightened substantially.
Economic outlook for 92% of banks the reason for tighter credit, for 52% it is risk appetite.
72% expect increase in commercial credit risk trends in the next 12 months.
Current credit risk trends increased significantly for all product types surveyed (except for agricultural loans and commercial leasing risk trends increased less than 50%).

Retail underwriting trends:
For overall retail credit 68% tightened underwriting trends.
52% tightened underwriting for HELOC conventional, 89% HELOC high LTV and 56% for real estate.
Economic outlook for 82%, risk appetite for 60% and product performance for 60% of banks the reason for tighter credit.
67% expect increase in retail credit risk trends in the next 12 months.
All product types, except affordable housing and other direct consumer, saw a significant increase in risk trends. All the banks surveyed (100%) reported increased current risk trends in HELOC high LTV.

No surprises in the survey. Economic Outlook is the most important determinant in the availability of credit both to commercial and retail customers. HELOCs are not available for borrowers with low equity in their collateral. Most banks originate new loans to hold only (81% commercial and 69% retail).

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source: Survey of Credit Underwriting Practices 2008
Office of the Comptroller of the Currency June 2008
http://www.occ.treas.gov/cusurvey/2008UnderwritingSurvey.pdf

read also: European bank lending worse in first quarter 2008
Friday, May 9, 2008
http://manonthestreet64.blogspot.com/2008/05/ezb-reports-worse-credit-conditions-in.html

read also: Fed reports banks tightened credit in first quarter of 2008
Monday, May 5, 2008
http://manonthestreet64.blogspot.com/2008/05/fed-reports-banks-tightened-credit-oin.html