Banks seem unprepared for the pullback Fannie Mae and Freddie Mac are planning as a Federal Reserve Board survey shows a sizeable chunk of lenders expect to sell or securitize large mortgages to the government-sponsored enterprises.

Polling 52 senior loan officers at domestic banks, the Fed found 44% said they expect to securitize or sell loans of over $417,000 to Fannie and Freddie in the next six months.

Though the Fed tailored its question narrowly — to cover only "conforming jumbo loans" — the response shows how much banks continue to rely on the two GSEs and was symbolic of larger problems that could lie ahead. Fannie and Freddie have said they plan to scale back mortgage purchases in the coming months.

After reporting an $821 million second-quarter loss last week, Freddie said it would hold its mortgage portfolio at its current level of $792 billion. Fannie said Friday that it lost $2.3 billion in the quarter and would quit purchasing alternative-A mortgages. It said its broader buying philosophy would be decided "day by day."

Conforming jumbo loans are relatively new. An economic stimulus bill enacted this year gives Fannie and Freddie temporary authority to buy loans of up to $729,000 in certain areas. Conforming jumbo loans are defined as those above the previous loan limit of $417,000.

About 30% of domestic respondents said they had sold such loans to Fannie and Freddie during the past three months.

Though the $729,000 cap is due to expire at yearend, the housing package signed into law last month will make the conforming loan limit $625,000 in certain areas permanently.

The Fed survey, released Monday, also found that bankers were downbeat about the industry's prospects well into next year. For example, 52% said they expect commercial real estate loan standards to tighten through the first half of next year; 47% were equally pessimistic on commercial and industrial loans.

Still, the bankers were relatively optimistic about the housing market. Only 33% of the respondents expecting continued tightening on prime mortgages into next year.

More than 39% of the respondents said they planned to keep strengthening standards governing revolving home equity lines of credit. Nearly 40% planned to do the same thing for credit cards.

Bankers have already tightened their standards on most types of credit in recent months. In Monday's survey, not a single respondent said they had eased the standards for any type of loan.

Nearly 81% said they had clamped down on lending standards for commercial real estate loans since April. Half the bankers said demand for the loans weakened in that period.

More than 57% said they were clamping down on commercial and industrial loans to large firms, while 65.3% said they were tightening standards on loans to small companies.

Bankers continue to say they are not tightening because of concerns about the stability of financial institutions. Only 4.8% of the bankers said they stiffened standards because of a deterioration in their current or expected capital position. Instead, many of the bankers — 52.4% — said they are restricting the loans because of the tough economic outlook.

As expected, bankers were particularly vigilant on home loans. Nearly three-quarters of the respondents said they had tightened standards on prime mortgages. More than 84% said they had tightened nontraditional mortgage standards, and 85.7% said the same for subprime mortgages.

The effects of the housing crisis continued to spread to other types of loans. More than 80% of the bankers said they were tightening standards on revolving home equity lines of credit.

Consumers turning to banks for other products are also having a tough time. More than a third of the bankers said they are less willing to make consumer installment loans now than they were in April and are strengthening lending standards.

Originally published in American Banker.