“Tight Lending” Most Prevalent in Distressed Areas!

Neighborhoods with a large number of foreclosures and price declines are noticing the biggest drops in lending the last year, according to a new report by the Federal Reserve. 

The Fed said the drop in lending in these areas is partially from a decline in loans to borrowers who don’t use the homes as their primary residences, which often means investors have moved in. The report also found an increase of lower-income borrowers in these communities. 

“Higher-income borrowers accounted for 29 percent of all loans in those distressed neighborhoods last year, compared with 52 percent of loans in those neighborhoods in 2005,” a Wall Street Journal article notes. “In less-distressed neighborhoods, higher-income borrowers accounted for half of all loans in 2005 and 43 percent of loans last year.”

Overall, weak demand and tight credit standards caused mortgage lending to drop in most areas last year. Including our Placerville, El Dorado County, California regions.

Lenders originated 7.9 million mortgages in 2010, down 12 percent from 2009, the Federal Reserve reported in its annual analysis of mortgage data of more than 7,900 mortgage lenders. 

Source: “Housing Slump Hits New Mortgage Loans,” The Wall Street Journal (Sept. 22, 2011)