Sep. 17, 2008 - Credit-Worthy Buyers See Tighter Lending

Interest rates are lower and existing-home prices have fallen dramatically in many areas. Now what the market needs are willing buyers who can find financing.

About 75 percent of U.S. banks tightened standards on mortgage lending to the most credit-worthy borrowers in the three months ended in July, according to the Federal Reserve's quarterly Senior Loan Officer Survey.

"Tighter standards assure the loans are less likely to fail, but also have had the unfortunate effect of limiting the ability of some first-time home buyers to enter the market,'' says Sara Tinsley Demarest, spokeswoman for the Washington-based Mortgage Bankers Association.

"Nobody really wants to take risk anymore. Deals are getting really hard to do now,” says Suzanne Bach, senior vice president of New York-based Guardhill Financial Corp., and an 18-year home lending veteran.

Source: Bloomberg, Sharon L. Lynch (09/16.2008)