Lending Rules Tighten

Harriet Johnson Brackey writes March 16 for South Florida Sun-Sentinel that refinancing is getting harder, even for those with great credit. Borrowers must pay higher fees than a year ago.

"I don't blame the lenders," said Gene Petrino, a mortgage broker with Midas Mortgage in Pompano Beach. "But they've gone from one extreme to the other — from everybody gets a loan to nobody gets a loan. There has to be a happy medium. And I hope we get there by the end of this year."

Federal Housing Administration mortgage loans can require borrowers to put less than 3 percent down. They are not priced according to the borrower's credit score.

In troubled markets like South Florida, Bank of America is one mortgage lender that has tightened its lending rules. "For example, our No Fee Mortgage Plus product, which is available in many parts of the country for a 5 percent down payment, requires a 10 percent down payment in the Miami region and other parts of the nation that are considered a declining market," said Terry Francisco, a Bank of America spokesman, in an e-mail.

He said Bank of America also lowered the loan-to-value amount for new home equity loans to 90 percent nationwide, but cut that to 80 percent in declining markets, such as South Florida.

Other lenders, including Wachovia, Washington Mutual, Countrywide and SunTrust, declined to discuss their mortgage lending standards. But spokesmen at several of South Florida's largest mortgage lenders conceded that their requirements are now higher than before.

The Britos are an example of why so many South Floridians are struggling.

The housing glut and tougher lending rules have reduced the pool of potential buyers for their home and for a rental townhouse that they'd also like to sell.

They'd like to refinance their mortgage, but they don't qualify, even though Luci and Danny Brito have good jobs in law enforcement and good credit. The Britos bought their home for $270,00 at the peak of the housing boom and appraisers say now it's worth $250,000 — $20,000 less than they owe on their mortgage loan. No lender is going to give them a new loan large enough to pay off their current mortgage.

A little more than six weeks ago, the Federal Reserve cut short-term interest rates by the largest amount in 18 years. Some hoped those cuts would translate into lower rates on long-term loans, such as mortgages.

It didn't turn out that way. Mortgage interest rates have risen, as bond investors, worried about the economy, have fueled a rush into Treasury bonds, which drove up long-term interest rates.

The average rate for a 30-year, fixed-rate mortgage last week was 6.13 percent, up from an average of 5.48 percent during the week of the Fed's rate cut.