Results from the most recent Senior Loan Officer Opinion Survey (SLOOS) indicate that lending standards on multifamily residential mortgages continue to show signs of tightening and the pace of tightening is growing.
The Federal Reserve Board’s SLOOS asks senior loan officers at large banks their opinion on changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months. In the most recent release, covering the second quarter of 2016, 44.3% of bank respondents indicated that lending standards at their bank had tightened over the quarter.
The net share of banks reporting that standards on multifamily residential mortgages had tightened has widened over the past year. The net share represents the difference between the percentage of banks indicated that standards had tightened and the proportion responding that standards had eased. As shown in Figure 1 below, a net share of 2.9% of banks reported standards had eased in the second quarter of 2015, but in the third quarter, a net percentage of 7.4% of banks reported having tightened standards. The net portion of banks tightening standards on multifamily residential debt rose in the three successive quarters.
A previous post demonstrated that banks account for the majority of multifamily residential debt outstanding. According to an analysis of bank-level call report data provided by the Federal Financial Institutions Examination Council (FFIEC), the share of federally insured depository institutions with an outstanding amount of multifamily residential debt outstanding on their balance sheet, has risen while the amount of debt outstanding has remained stable. In contrast, the proportion of banks with any outstanding amount of 1-4 family first-lien mortgages on their balance sheet has remained steady and fluctuations have occurred in the outstanding amount of 1-4 family first-lien mortgage debt. However, in recent years, growth in the share of banks with outstanding multifamily residential mortgage debt outstanding rose more slowly than the growth in the outstanding amount of multifamily residential debt.
In 2001, approximately 65% of depository institutions had some outstanding multifamily residential debt residing on their balance sheet. As illustrated by the Figure 2 above, the proportion increased 13 percentage points to 78% by 2015. However, much of the growth took place between 2001 and 2012. Between 2012 and 2015, the percentage of banks with multifamily residential debt rose by 1.0 percentage point. By comparison, the share of banks with any 1-4 family first-lien residential mortgage debt remained generally stable over the 2001 to 2015 period at 97%.
As a share of total assets, the total amount of multifamily residential debt outstanding grew slightly between 2001 and 2015, from 1.6% in 2001 to 2.2% in 2015. That growth largely took place in the last few years. Between 2001 and 2012, multifamily residential debt outstanding as a percentage of total assets held steady at 1.6%. Since 2012, multifamily residential debt relative to total assets grew by 0.6 percentage point.
The total amount of 1-4 family residential mortgage debt outstanding as a share of total assets, which is larger than the multifamily residential portion, has fluctuated over the time period. Between 2001 and 2005, 1-4 family first-lien residential mortgage debt outstanding rose from 10.4% to 17.2%. After peaking in 2005, the outstanding amount as a share of total assets shrank to 13.1% by 2008 and then by an additional 1.7 percentage points by 2014. In 2015, the outstanding amount of 1-4 family first-lien residential mortgages as a percentage of total assets ticked up to 11.5%.