If you are sitting on the fence waiting for mortgage lenders to open the flood gates on the dammed up flow of home loans, get comfortable.

Lenders may not be finished turning the screws on home loans.

For borrowers, that means continued higher costs for some home loans and tougher qualifying requirements for approval.

Risky lending and borrowing habits during the last housing boom left too many homeowners with mortgages they couldn't afford.

That forced lenders to end the boom with the sound of the door on risky loans being slammed shut to lock out losses from failed home loans.

Forty percent of loan officials said their institution tightened lending standards on prime, nontraditional and subprime home loans in the past three months, according to the October Senior Loan Officer Opinion Survey on Bank Lending Practices.

That's three times as much as the 15 percent that reported tightening lending standards in the July report, says the Federal Reserve, which conducts the quarterly survey.

The Fed said 52 domestic banks and 20 foreign banking institutions participated in the latest survey.

Forty percent of loan officers surveyed said standards for prime loans had tightened, but the percentages were higher when only nontraditional or subprime loans were considered.

Of the 40 banks originating nontraditional residential loans, 60 percent in the October survey, reported tightening lending standards on nontraditional loans, up from 40 percent in July.

Five of the nine banks writing subprime loans -- 55 percent -- said they tightened lending standards on subprime loans over the past three months. A similar percentage in July said they had tightened standards, according to the survey.

As a result of the tightening, demand for home loans has weakened.

Overall, about half of the domestic loan officers indicated that demand for prime, nontraditional, and subprime residential mortgages had weakened over the past three months, compared to three months prior. Lenders reporting weaker demand for prime and nontraditional mortgage loans increased notably compared with the July survey. Those reporting weaker demand for subprime loans was only slightly larger than in July, the Fed said.

By loan type, demand for home loans was weaker during the last three months (when compared with the previous three months) at 59.2 percent of lenders offering prime mortgages, at 55 percent of lenders offering nontraditional mortgages and at 50 percent of lenders offering subprime loans.

The Fed's survey also found tighter lending standards and less demand for jumbo loans -- those larger than the $417,000 conforming loan level -- over the past three months.

Most, 84.4 percent of lenders, said over the past three months the size of jumbo loans remained the same while 15.6 said tighter restrictions were placed on the size.

The cost of jumbo loans rose at 48.9 percent of lending institutions, remained the same at 48.9 percent of lenders and declined at 2.2 percent of lenders.

The minimum down payment necessary to qualify for a jumbo loan rose at 35.6 percent of the lenders in the survey, but remained the same at 64.4 percent of the lenders.

Also the minimum credit score necessary to land a jumbo rose at 28.9 percent of the lenders and remained the same at 71.1 percent of those surveyed.

Greater income and asset documentation was required at 51.1 percent of lenders while the level of documentation remained the same at 48.9 percent of lenders, the Fed reported.

The tougher restrictions pushed the share of jumbo loan originations down at 55.4 percent of lenders surveyed, the share remained the same at 34 percent of lenders and the share of jumbo originations rose at 10.6 percent of lenders.

The squeeze is also on for commercial real estate loans used for construction and land development. Nearly 52 percent of lenders said credit standards had tightened for commercial realty loans and 48 percent said demand was down over the past three months, according to the Fed's survey.

Published: November 13, 2007

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.