Sudbury MA Real Estate

Loan requirements tighten, change as home sales fall

NEW YORK - The loan you qualify for on Monday might be out of reach on Tuesday.

Bankers and lenders are rapidly changing their requirements as home sales and prices plummet and delinquencies and defaults rise. Problems in the mortgage market are spilling into other lending markets as customers struggle to keep up with payments on other loans, such as auto and credit card payments.

“The market is reinventing itself daily,” said Les Berman, owner of Beverly Hills, Calif.-based EB Financial and the president of the California Association of Mortgage Brokers. “I did my first loan in 1971 and have never seen anything like this.”

To adjust their standards - which many critics say grew too lax in the middle of the decade - lenders now are raising minimum credit scores, offering smaller loans, and requiring detailed proof of income and assets.

For those who do meet the tightened criteria, a new plan disclosed yesterday by the Federal Reserve to provide $200 billion to the financial services sector should mean there is plenty of money available for borrowers and lower interest rates, said David Wyss, the chief economist at Standard & Poor’s.

Mortgages have been among the worst performing loans in recent months. More than 16 percent of subprime mortgages - loans given to customers with poor credit history - were delinquent at the end of the third quarter, according to the latest data available from the Mortgage Bankers Association.

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