Two reports issued by the Wells Fargo Economics Group both point towards a positive climate for economic growth, albeit for different reasons.
The first report followed FDIC loan performance, noting cyclical improvement in loan performance and a trend favorable for credit quality.
The second report commented on underwriting practices, noting, "The Comptroller's Survey of Credit Underwriting Practices revealed that commercial and retail underwriting trends eased in 2013 compared to the earlier recovery period from 2009 to 2012. This is a plus for growth."
The Wells Fargo Economic Group found that post-2009, residential loan performance (as measured by loans that were 30-89 days overdue) dropped sharply, mirrored by falls in both GDP growth and jobs. The drop in price came as, "a sharp correction to the unusual strength and price appreciation of the housing market as well as the easing of credit standards, in the prior expansion."
However, since 2009, the group reported a gradual decline of loans overdue, falling to a five year low of 2.1 percent. The group attributes the fall in delinquent loans to, "[M]odest GDP/job growth and, most recently, the rise in home prices that has assisted some homeowners in selling their homes."
Underwriting standards also played a part in an economic climate poised for growth.
The group found that commercial and retail underwriting trends eased in 2013 compared to 2009 to 2012. The eased standards are "a plus for growth," according to the Wells Fargo Economics Group.
"Competition and a better economic outlook were factors leading banks to ease credit standards," the report said.
Overall retail credit underwriting trends noted that credit standards were loosened on 22 percent of products, unchanged in 68 percent, and were only tightened in 10 percent.
Relaxed credit standards in 2013 was the third consecutive year since 2011 that the percentage of eased standards rose, according to the Economics Group report.