Another Sign Credit Crisis Is Easing

Since the subprime mortgage collapse of two years ago, banks have put in place measures to toughen up their lending practices.

You now have to demonstrate income to get a loan. You have to fill out more paperwork. There aren't many subprime loans around.

Aside from loans for commercial real estate, banks have ceased tightening standards for loans according to a quarterly report from the Federal Reserve.

Not that they are easing standards either.

The Los Angeles Times says:

Meanwhile, demand for home mortgages and other consumer loans weakened, a sign consumers are leery of making big-ticket purchases given double-digit unemployment and the fragile economic environment.

Consumers will help support economic growth, but they won't lead it by going on spending sprees. That's one reason the recovery this year is supposed to be modest rather than booming.

Looking ahead, "significantly fewer" banks expected widespread deterioration in the value of the loans they hold this year, the Fed said. That's an improvement from the prior two years, the Fed said.

On the consumer end, some banks indicated that the credit quality of home equity loans and home mortgages held by prime borrowers probably would erode further in 2010.