Lenders are quickly closing the door to borrowers with low credit scores, small down payments for a new home or little equity in their current homes. Homeowners and buyers in high-cost areas such as California, Florida and the Northeast are also reeling as lenders chop “jumbo loan” programs.
“The market for virtually any loans with the slightest element of risk has effectively disappeared,” John Bollman, an executive vice president at Cleveland-based National City Mortgage, wrote to his employees.
In explaining the company’s latest pricing and product changes that will weed out some of these borrowers, he said, “I have been a mortgage banker for 20 years and have never seen such a severe reaction to credit risks in the market place … (and) things may even get worse before they get better.”
Editor’s Note: To see how all of this happened see our book “The History of Subprime and Predatory Lending With An Emphasis on Household International”