Nearly half of the 56 banks reported that they offer “nontraditional” home mortgages, such as interest-only loans. Virtually all banks say their lending standards for Fannie Mae/Freddie Mac loans, as measured by credit score and loan-to-value ratio, have tightened since 2006. Key factors include difficulty in getting mortgage insurance, repurchase risk and, to a lesser extent, higher servicing costs for delinquent loans. Most banks don’t see new treatment of mortgage servicing rights under Basel III as a major deterrent to staying in the mortgage business. Increasing compliance burden is a bigger...