A recent survey by the Federal Reserve Board of senior loan officers on bank lending practices indicates a tightening of lending standards. About 80 percent of domestic banks and 55 percent of foreign banks reported tightening their lending standards on commercial real estate loans over the past three months. A less favorable economic outlook and a worsening of the conditions of commercial real estate markets were common reasons for the tightening of standards.

The survey also indicates a tightening of lending standards on prime, nontraditional, and subprime residential mortgages over the past three months. About 55 percent of the domestic banks that responded to the survey indicated that they had tightened their lending standards on prime mortgages. Approximately 85 percent of survey respondents that originate nontraditional mortgages reported a tightening of their lending standards on those loans. Also, about 60 percent of the domestic banks that responded to the survey reported a tightened of standards on revolving home equity lines of credit.

The survey indicates that large majorities of respondent banks expect their commercial and residential real estate portfolios to deteriorate in the coming year.