Return to Normal...No Time Soon

Despite some encouraging economic signs, a clear majority of bankers surveyed by the Federal Reserve Board do not expect underwriting standards for residential real estate, commercial mortgages or credit cards to normalize before 2011.

In the central bank's survey of 55 senior loan officers at domestic institutions, some said it could take even longer for standards to return to the levels that prevailed before the crisis hit. Four in 10 bankers told the Fed that underwriting standards for even investment-grade commercial mortgages would not normalize for "the foreseeable future." Another 20% said that such a recovery would not happen for at least two years.

Such pessimism was evident across loan categories. A little more than 41% of respondents could not predict when standards for prime borrowers seeking residential mortgages would return to normal, and 32% said the same for credit card borrowers. More than 12% of officers said it would take until 2011 for residential mortgage standards to normalize; 25% said the same about credit card loans.

Despite talk of a recovery already underway on Wall Street, Monday's survey results crystallized warnings from Fed Chairman Ben Bernanke that a return to normal levels of growth will take several years to achieve.

source: American Banker