A few months ago, loan officer Gary Sayble saw a sizeable number of clients qualify for popular, and widely available, home loans that required no money down.
What a difference a few weeks can make.
Amid the recent closures of subprime loan offices and news of tightened underwriting standards, the number of prospective home buyers coming in each day to the Larchmont Village office of Prudential Real Estate has been reduced to less than half a dozen.
That’s not only far fewer than at the height of the real estate boom, but these days only about 70 percent of the applicants qualify for loans, with their tougher terms, while a few months back it was nearly 95 percent.
“I had some guy today who wanted to buy a $1.2 million property with no money down, and I had to say, ‘Sorry, you missed it by two months. Two months ago I could have done that for you,'” recalled Sayble, who is a private mortgage broker independent of Prudential. “If you want 100 percent financing, now it goes for 5 percent down; that’s the new rule.”
Sayble, of course, is far from the only loan officer who has witnessed the sea change overtaking the loan industry.
Stephen Shintani, a principal of Culver City real estate financing company Shintani Group, deals with clients who want upscale properties and months ago could have been allowed to stretch their loans to fit big houses almost out of their reach.
One of his solutions: sending the clients to credit repair counselors, who might or might not be able to make a difference though in retrospect he feels better about that than writing loans that negatively amortize.
“The loans that were adjusting in two months negative amortization loans that’s just not a good loan,” said Shintani, who specializes in clients at the higher end of the market. “It puts people in much worse financial shape. It’s far better to refer them out to credit repair, it makes a world of difference.”
However, that’s not the universal sentiment among workers in the mortgage industry. Allen Jackson, vice president of Bristol Home Loans in Bellflower, said that loans have even dried up for responsible clients who could have used the leg up to get into the market.
“There are numerous loan applicants who can make their payments and get into a home, but can’t get a loan now because of a shakeout in the industry,” Jackson said. “These folks are using their credit cards and are, say, at 70 percent of their (credit) limit, but don’t have serious credit problems (like bankruptcy or long trails of missed payments).”
Sayble said the sudden change in underwriting criteria was a shock to many in the mortgage industry, but many of his colleagues at least those who still have jobs are dealing with it as best they can.
“The market adjusted itself and it was easy to see it all made perfect sense. One hundred percent still exists but the rates are a lot higher because it was way too much risk,” he said.
