Along with taking their usual look at activity during the past three months, Federal Reserve officials also asked participants in the latest Senior Loan Officer Opinion Survey on Bank Lending Practices to examine trends going back 10 years.
Specifically, the Fed wanted a description of the current level of lending standards at banks relative to the range of standards that has prevailed between 2005 and the present. When it comes to subprime auto financing, the participants’ responses showed the banks that underwrite vehicle service contracts in this space indicated that standards on such loans remained tighter than the midpoints of the corresponding ranges since 2005 on net.
While the survey included more than 60 banks participate in prime auto financing, a total of 30 banks that responded to the survey delve into the subprime space.
A total of 11 banks said their subprime underwriting trends have been near the midpoint of the range that standards have been during this period. Seven banks indicated they have been somewhat tighter than the midpoint while six institutions noted they have been somewhat easier.
Another five banks said they have been either significantly tighter or near the tightest level that standards have been during this period as just one acknowledged it has been significantly easier.
Of the 30 banks that participate in subprime auto financing and responded to the Fed’s survey, the split was even between banks classified as large — which are generally defined as firms with annual sales of $50 million or more — and small firms — which are those with annual sales of less than $50 million.
Within the prime spectrum, the Fed found that 40 of the 61 banks told officials that their underwriting has been near the midpoint of the range that standards have been during this period. Another 12 firms said they have been somewhat easier while the remaining nine indicated they have been either somewhat or significantly tighter.
Looking at just the past three months, the Fed survey mentioned 45 out of 62 described demand for vehicle financing as “about the same” during that span.
As a result, the vast majorities of respondents told officials that several other factors have remained virtually unchanged during the past three months, including:
— Credit standards for approving applications
— Maximum maturity
— Spreads of loan rates over the bank’s cost of funds
— Minimum required down payment
— Minimum required credit score
— The extent to which financing is granted to some customers who do not meet credit scoring thresholds
The entire July survey can be downloaded here.