Survey: Line of credit standards unchanged

WASHINGTON — Most U.S. banks haven’t altered lending standards for home equity lines of credit even after authorities raised concerns about whether lenders were adequately weighing risks, says a Federal Reserve survey released Monday.

Banking regulators in May worried that lenders had eased their standards for granting home equity lines of credit to consumers in a way that increased the risk of problem loans.

In many cases, “institutions’ credit risk management practices for home equity lending have not kept pace with the product’s rapid growth and easing of underwriting standards,” the federal banking regulators, including the Federal Reserve, said in May.

The Fed survey of 57 U.S. banks found that “most domestic institutions indicated that they had not changed their lending standards or terms on home equity lines of credit” in response to regulators’ concerns about these lines of credit.

A home equity line of credit lets a homeowner borrow against the value of his home. These credit lines have increased in popularity as home values have surged.

Only a few banks reported having tightened their credit standards for home equity lines of credit; only five said they are charging more for these credit lines.

In response to another question, many banks said that a new bankruptcy law — which makes it harder for consumers to erase their debts — had no effect on their loan policies for businesses and individuals. The law took effect Oct. 17.

Meanwhile, the survey said demand for home mortgages has weakened over the past three months. Economists believe the hot housing market will cool a bit as mortgage rates climb.