Most banks indicated that their reluctance to accept mortgage applications from borrowers with less-than-perfect records is related to “putback risk” – the risk that a bank might be forced to buy back a defaulted loan if the underwriting or documentation was judged deficient in some way.
Small businesses owners, who in the past might have tapped into the equity in their homes or used their homes as collateral for small business loans, also have found conditions challenging in recent years. The stock of small loans to businesses on bank balance sheets at the end of last year was more than 15 percent below its peak in 2008.