This is the lending clampdown in progress. This is the reason that there is a long way to go to equilibrium.

NEW YORK (MarketWatch) - Bank of America said Tuesday that it will institute strict new lending guidelines when it completes it acquisition of troubled lender Countrywide Financial Corporation later this year. The new changes instituted will include ending the origination of subprime mortgages, greatly reducing the number of no- or low-documentation loans and issuing adjustable rate mortgages that have a much longer interest-only payment period in order to reduce huge resetting payments. Bank of America agreed to purchase the nation’s largest lender, Countrywide, in a white knight, $4 billion all-stock deal scheduled to close in the third quarter. When the merger is completed, Bank of America will originate or service at least one out of every four of the country’s mortgages. “We recognize this tightening, by definition, restricts the availability of credit to some borrowers. However, this will help ensure that those who get loans can afford to repay them,” said Bank of America Global Consumer Credit Executive Bruce Hammonds in a statement.

Italics mine.