The news is certainly not good these days. The beginning of 2008 has not been pretty. Perhaps we can find a niche’ or some sort of viable approach that gets us the credit needed to move forward and do deals. 

I always believe that information is power, so here it is … unedited and unfettered …. 

As reported by Rex Nutting, Washington bureau chief for MarketWatch, more than half of the banks surveyed by the Fed , during from January to March 2008, said they had tightened the screws on commercial and industrial loans, commercial real estate loans, residential mortgages, and home-equity lines of credit. Large numbers of banks tightened standards for other types of loans, including consumer credit cards.  

Almost no banks eased credit terms for any type of loan, the Fed said in its quarterly senior loan officer survey. Read the full survey results. The credit squeeze has moved far beyond the sub-prime segment to affect nearly every borrower.  

Unfortunately, according to the report, tighter credit could slow economic growth, especially consumer spending, economists say. Lack of credit could sink the commercial real estate market as well. Banks said they were restricting credit because of: 

• Worries about the economy,
• Worries about risk or illiquid markets, and  
• Worries about their own fragile capital position.  

From a practical perspective, here is what you need to know. Banks are implementing the following strict criteria on loans: 

• Increasing interest-rate spreads,
• Requiring more documentation,  
• Demanding more collateral, 
•  Requiring co-signers, or 
• Requiring covenants before granting credit.  

Here is lending data affecting MarylandCommercialTitle.com and our colleagues – those of us directly involved with Banking, Investing, Building, Development, Legal and Title: 

• Commercial Real Estate: Seventy-nine percent tightened standards, while 52% said demand was weakening.  
• Residential Mortgages: A record 62% of banks said they tightened standards for prime mortgages, while 49% said they saw reduced demand. For subprime mortgages, 78% tightened standards, with the number of banks who offer such loans declining to 17% of banks from about 30% two years ago. For nontraditional mortgages, 76% tightened standards.  
• Home-Equity Lines Of Credit (HELOC): Sixty percent tightened standards on home-equity lines of credit, with 48% tightening standards on existing lines. For those who tightened, 96% said it was because the equity in the home had fallen below collateral requirements.  

Other market related lending details: 

• C&I loans: Fifty-five percent of banks tightened standards for commercial and industrial loans to large and medium firms; while 52% tightened for small firms. Ninety-six percent said they tightened in part because of the weaker economic outlook, while 78% cited less tolerance for risk, 54% cited decreased liquidity in secondary markets. and 33% cited their own weakened capital position.  
•  Consumer credit: A record 25% of banks reported less willingness to extend consumer installment loans; only 2% were more willing.
• For credit cards, 32% tightened standards, mostly by refusing loans to consumers without good credit. For student loans, 55% said they would provide fewer subsidized loans this fall than last fall, while 40% said they’d provide fewer non-subsidized loans.

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