When the federal government bailed out the banks a year ago it was with the expectation that taxpayer money would be recycled back into the economy in the form of more loans. We all know how that didn’t play out according to Washington’s plans.  But now that the recession has been unofficially deemed over and the economy seems to have stepped back at least a few feet from the financial-crisis cliff, are lenders following the script (finally) and opening the spigot?

Not exactly. The latest Federal Reserve survey of senior bank loan officers in October finds mortgage lenders are still plenty grumpy. Just 3.6% of lenders reported they had they had eased their mortgage qualifying standards “somewhat” over the past three months. But that was more than wiped out by the 25% who said they had tightened their standards. That said, the 25% who recently tightened are well below the record 75% who reported tightening in July 2008. But what we’re not seeing is any meaningful easing.

Surprisingly, half the banks say they reduced existing home equity lines of credit in the most recent three-month stretch. We’re this far into the real estate correction and they still haven’t finished with cutting their HELOCs? Apparently banks aren’t convinced the slide in home values is anywhere near over. Or they have re-run their models and worry that that persistently high unemployment will push the delinquency rate on home-backed loans higher. Or the lenders are reacting to problems elsewhere in their  business (see: commercial real estate) and are looking for any opportunity to reduce their risk exposure. Or all of the above. …read more