In the January survey, one-third of domestic institutions—a larger net fraction than in the October survey—reported having tightened their lending standards on C&I loans to small as well as to large and middle-market firms over the past three months.....
About two-fifths of domestic banks—a higher net fraction than in the October survey—reported having increased spreads of loan rates over their cost of funds over the previous three months.
About 80 percent of domestic banks reported tightening their lending standards on commercial real estate loans over the past three months, a notable increase from the October survey
About 55 percent of domestic respondents indicated that they had tightened their lending standards on prime mortgages, up from about 40 percent in the October survey.2 Of the thirty-nine banks that originated nontraditional residential mortgage loans, about 85 percent reported a tightening of their lending standards on such loans over the past three months, compared with about 60 percent in the October survey.3 Finally, five of the seven banks that originated subprime mortgage loans noted that they had tightened their lending standards on such loans, a proportion similar to that in the October survey
About 60 percent of domestic respondents indicated that they had tightened their lending standards for approving applications for revolving home equity lines of credit over the past three months. Regarding demand, about 35 percent of domestic banks, on net, reported that demand for revolving home equity lines of credit had weakened over the past three months.
large majorities of domestic and foreign banks expect a deterioration in loan quality in 2008. Regarding loans to businesses, between about 75 percent and 85 percent of domestic and foreign banks expect a deterioration in the quality of their C&I and commercial real estate loan portfolios. About 15 percent of domestic and 20 percent of foreign respondents expect a substantial deterioration in the quality of their commercial real estate portfolios. Concerning residential real estate loans, between about 70 percent and 80 percent of domestic respondents expect the quality of their prime, nontraditional, and subprime residential mortgage loans, as well as of their revolving home equity loans, to deteriorate in 2008. Finally, about 70 percent of domestic respondents expect a deterioration in the quality of both credit card and other consumer loans.
So the banks are tightening up their controls and increasing the spreads that they charge in order to cover their costs and risks. This means each basis point of Fed rate cuts is slightly less effective than they otherwise would have been. Furthermore even at lower rates, there are fewer borrowers seeking loans and fewer loans being approved so the question as to whether or not the American consumer is tapped out should get raised, again.
Anectodally I am seeing the same tighter standards and fewer offers of credit. First, I have been receiving a lot less junk mail credit offers and the ones that I am receiving either have higher initial teaser rates, significantly lower credit limits, or much narrower reply now deadlines. And on the mortgage front, the grocery store near my house has a major bank's branch office in it. They are advertising a 30 year fixed rate mortgage for 5.625% which is a pretty damn good rate. However the fine print is for 20% down, and a FICO over 720. Three years ago, that rate would have been for 7.5% down and a FICO over 650.