Like a lot of Triangle mortgage brokers, he is routinely asking customers for more information these days to satisfy lenders -- more pay stubs, more credit card statements, more explanations about past debts.
Plenty of loans are still available for worthy borrowers, but not without some effort.
"The easy loans are harder, and the hard loans are impossible," said Astolfi, owner of DNJ mortgage in Raleigh. "It's a new day."
A report released this week by the Federal Reserve said more than 60 percent of the banks surveyed in April tightened their mortgage standards, some significantly.
The closer scrutiny of applications is part of the fallout from the credit crisis that began last year. Lenders have since lost billions of dollars on loans that required little or no documentation.
"A year ago, the lending industry would take your word for just about anything," said Shields Pittman of York Simpson Underwood, a real estate agency in Raleigh. "Not today. Now you have to prove everything you say."
The result is more work for brokers and higher costs for borrowers with below average credit scores, said Margaret Pattison, president of YSU Lending in Raleigh.
"Your credit score makes a big difference in what your interest rate will be," Pattison said. "Below 720 in your credit score, and the rate bumps up."
Two years ago, few lenders blinked at a score of 700, which is still well above the North Carolina average of 667, according to creditreport.com.
But similar scores today -- or situations such as recent college graduates -- are certain to draw scrutiny.
Better deals are available for loans backed by the Federal Housing Administration. But the process, often used by first-time home buyers, takes longer and had fallen out of favor.
The credit crunch changed that, too.
So many people are now using FHA loans that some lenders have started training extra underwriters to handle the volume, Pattison said.
Thomas Schmadtke was among borrowers who used the FHA program when he decided to refinance two loans on his Wake Forest home.
Schmadtke used the first loan to buy his house in 2005 and then took out an equity loan with a variable interest rate.
Wanting to take advantage of lower rates, he refinanced with a 30-year loan at 6 percent a year.
It took almost eight weeks to close the loan of roughly $257,000, but part of that time was lost when the FHA decided to increase its lending limits.
"They asked for all the same things they did when I first bought the house," Schmadtke said. "It just took longer this time."
Even with the tighter restrictions, some borrowers find their loan requests still sail through the system.
Brett Albertson of Raleigh said he actually brought too many documents for his loan meeting. But he also brought an excellent credit score, a down payment that exceeded 20 percent of the home's value and a work history for himself and his wife.
"I guess they judged us based on a quick inspection to be a good risk, so they didn't really delve very deep," Albertson said.
Realtors and brokers say such stark differences in how loans are handled illustrate the realities of today's market.
Eager to make money and reduce risk, lenders are happy to work with borrowers who have a good track record.
But even a few blemishes will slow things way down.
"Two years ago, there was no difference at all in those groups," said Ross Rhudy, general manager of Ammons Pittman GMAC Real Estate. "But that was two years ago."
Astolfi of DNJ mortgage said another difference he sees is the unwillingness of lenders to blindly accept property appraisals.
"Appraisals are done based on the value of similar homes within a circle drawn around your house," he said. "That circle is getting smaller and smaller, and instead of accepting the value of surrounding homes 18 months ago, they only want homes that sold in the past six months.
"The pendulum has definitely swung to the other side."
RAISING THE BAR
In response to the credit crisis triggered by high default rates on subprime mortgages, banks have tightened standards. An April survey by the Federal Reserve reported the following results based on responses from 56 domestic banks and 21 U.S. branches of foreign banks.
--About 60 percent of domestic banks tightened their lending standards on prime mortgages.
--Tougher standards extend beyond home mortgages to other types of consumer debt such as credit cards and home equity lines of credit.
--Of the 37 banks that originated non-traditional residential mortgages, about 75 percent reported tighter standards over the past three months.
--Only nine banks are currently making loans in the subprime category, and of that group, 78 percent had tightened lending standards.
--About 55 percent of domestic banks reported imposing tougher standards on business loans, up from about 30 percent in a survey in January.
THE FEDERAL RESERVE BOARD
tim.simmons@newsobserver.com or (919) 829-4535
To see more of The News & Observer, or to subscribe to the newspaper, go to http://www.newsobserver.com. Copyright (c) 2008, The News & Observer, Raleigh, N.C. Distributed by McClatchy-Tribune Information Services. For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.
More News:
Market Updates |
Stock Alerts |
All Trading News |
Stock Index
|
|
