Importantly, however, restrictive mortgage lending conditions do not seem to be linked to any insufficiency of bank capital or to a general unwillingness to lend. Certainly, some tightening of credit standards was an appropriate response to the lax lending conditions that prevailed in the years leading up to the peak in house prices.
Mortgage loans that were poorly underwritten or inappropriate for the borrower’s circumstances ultimately had devastating consequences for many families and communities,  7  The Senior Loan Officer Opinion Survey on Bank Lending Practices is available on the Board’s website at www.federalreserve.gov/boarddocs/SnLoanSurvey/default.htm. 8  A conforming mortgage is one that is eligible for purchase or credit guarantee by Fannie Mae or Freddie Mac.