Home equity loans appear to be getting tougher to get, even as banks are easing credit for most other types of credit, according to a new analysis by the federal Office of the Comptroller of Currency (OCC).

An annual credit survey of 86 of the nation's largest banks and federal savings associations found that more than one in five lenders offering home equity loans have tightened their lending standards, while loosening their guidelines on credit cards, small business loans, corporate lending and auto loans.

Tightening was even greater for home equity loans with high loan-to-value ratios, with half of lenders saying they tightened their lending standards over the past year, and none loosened them.

Standards tighten despite rising home values

This tightening of home equity credit occurred despite strengthening home values over the past two years that gave homeowners more equity to work with and an improving economy that reduced the risk of defaults.

At the same time, that overall increase in equity made it easier for the average homeowner to obtain a home equity loan even as lenders tightened their criteria for making such loans, as more borrowers were able to meet the criteria.

Twenty-two percent of lenders said they tightened their guidelines for home equity loans, an increase from 14 percent who said they did so last year. Only 5 percent eased their standards, whereas 18 percent eased them in last year's report.

Residential mortgage standards mostly unchanged

For residential mortgages, lending standards tightened, but only slightly. Thirteen percent of lenders said they tightened their standards, while 11 percent eased them, a near wash. That left more than three-quarters of participating lenders who residential mortgage standards remained unchanged.

By contrast, one-third of lenders loosened their underwriting requirements for consumer credit cards, compared to about 15 percent who tightened them, while more than 60 percent loosened their credit guidelines for indirect consumer lending, mostly auto loans.

The survey, conducted annually, asked lenders about changes in their lending policies over the 18-month period ending June 30, 2013.

Published on February 1, 2014