Lending Environment Update

From the desk of:

Rich Storey
Mortgage Advisor
615.260.8028

Credited to: www.CNNMoney.com

Farmington Financial is a full-service home lending organization.

Banks loosen standards, but credit still tight
Federal Reserve survey reveals that fewer banks tightened their lending standards in latest quarter; loan demand remains weak.

NEW YORK (CNNMoney.com) -- Credit continued to remain tight at the nation's banks in the final three months of 2008, according to a report published Monday by the Federal Reserve. But a smaller percentage of institutions toughened their lending standards.

In its latest survey of loan officers, the Fed revealed that the number of banks that tightened their lending policies on both consumer and commercial loans fell during the fourth quarter when compared to the previous quarter.

The survey, which is widely viewed as an accurate assessment of bank lending activity, also revealed that demand for consumer and business loans continued to weaken as the U.S. economy deteriorated further.

Banks' willingness to lend money has become a focal point in the ongoing crisis after the U.S. government provided nearly $200 billion in government funds to financial firms in an effort to get credit flowing again.

Both lawmakers and taxpayers have expressed concerns that instead of lending, many banks are hoarding the cash, using capital to fund acquisitions or paying lavish bonuses.
Some industry executives have maintained that they are still making new loans and extending existing credit lines to both consumers and businesses.

But those rebuttals have provided banks little relief from Congressional scrutiny as lawmakers prepare to release the second half of the $700 billion financial rescue package.

Hoping to deflect some of that criticism, Bank of America (BAC, Fortune 500), which has received $45 billion in government aid, said last week it planned to publish reports that would track its lending activity in multiple areas.