Consumer Credit Expands – Lending Standards Tighten
For the economy, surprising, debt can be a good thing. Surveys show that consumer credit expanded and lending standards tightened in the 3rd quarter of 2015. Whether it is a construction or land loan, an auto loan, a student loan, a mortgage, or even credit card debt, the expansion of credit overall shows that the economy is on an upward trend for consumer and business credit. Consumer credit grew 8.5% and 7.5% in the 2nd and 3rd quarters of 2015. What accounted for most of this debt was non-revolving credit such as mortgages, auto loans, and student loans. This non-revolving credit rose 7.9% in the 3rd quarter. Revolving consumer credit also grew by 6.5%, and credit limits have been on the rise for all of 2015. Total credit limits have increased by 5.1% since the 1st quarter of 2014.
On the flip side, credit requirements have continued to be challenging for builders and developers alike while banks are constantly adhering to new lending standards issued by the federal government including the latest release of the Closing Disclosure which has now replaced the traditional HUD-1 Settlement Statement typically used in all real estate closings.
Lending restrictions by the 20 largest documented banks have actually eased more than credit restrictions of smaller banks. This would be excellent news except that the large banks do not hold a big majority of real estate loans – only 33% over the last 7 years. The senior loan officers of other banks that do hold the majority of land loans, 
loans, and construction loans were surveyed to find out if lending had eased on these types of loans. 6.7% of loan officers said that restrictions had tightened compared to 2.7% of loan officers at the larger banks. According to the survey, overall 4.4% of loan officers surveyed said that lending standards had tightened. However, there was a big discrepancy between the answers of those surveyed, and the conflicting answers showed that many senior loan officers felt that standards had actually eased during the third quarter of 2015. Regardless, lot sales and construction loans have increased over the past 3 years, and builders and developers are now having a hard time with finding sub-contractors to build their houses – a good problem to have!
