Qualified borrowers face credit squeeze
Lenders are rejecting more loan applicants with strong credit scores, the latest indication the nation’s credit crunch is deepening and further depressing the housing market and the economy.
Mortgage companies are growing more cautious and tightening lending standards for some of their most credit-worthy customers – from increasing down payments for home purchases to requiring higher credit scores for loan approvals.
An applicant has to be a prime borrower to qualify for a mortgage or to refinance a loan, said Thomas Marroni, president of New Boston Mortgage Corp., a loan brokerage firm. Two months ago, one out of every 15 of his top-rated loan applicants was turned down. “Now, it’s four out of 15,” he said.
Fifty-five percent of senior loan officers at US banks in January tightened lending standards to prime customers, up from 40 percent in October, according to the latest survey by the Federal Reserve Board. In recent weeks, the situation has deteriorated as mortgage companies worried about a recession have pulled back further on making new loans and refinancing existing mortgages, and have terminated home-equity lines of credit, said lenders, brokers, and borrowers.