From the Press of Atlantic City:
A single mother who earns $14.20 per hour at Tropicana has found herself in the same position as the owner of a law practice and three investment properties in Ventnor: Both are having a harder time obtaining a mortgage here than they would have six months ago.
Almost anything went among mortgage lenders and brokers until problems in the industry surfaced publicly early this year. Some lenders freely gave 100 percent financing to people with bad credit who couldn’t document their income. Now, jittery lenders are requiring better credit scores, down payments and documentation of income as dozens of mortgage companies are being forced to close and more people default on their loans.
The tightening credit market is making it harder for some people to obtain mortgages – especially those with no money down – say local brokers, who are scrambling to keep up with guidelines that beleaguered lenders are changing almost daily. Many of them, while acknowledging the distress to their bottom lines and some consumers, see the pullback as a return to standards that should have been required in the first place.
At one end of the homebuyer spectrum is Doris Rodas, who makes sandwiches at Tropicana Casino and Resort and has rented in Atlantic City for 22 years. Her credit score is high, but she cannot afford the down payment that lenders are increasingly demanding. She said she lives “check for check, every week – no extra money for (anything).”
Rodas’ real estate agent, Jose Sinclair of Balsley Losco in Northfield, has a stack of files just like hers.
All these people could be real buyers before,” he said. “That’s why we are so slow.”
Rodas has been looking for a house with enough room for her mother, brother and son. She will not be able to obtain 100 percent financing for a house beyond the $150,000 to $175,000 range because her income is low. Standard loan requirements prohibit her from obtaining a mortgage with monthly payments exceeding about 41 to 45 percent of her income (minus monthly liabilities, such as car payments), her loan officer said.
The Atlantic City area’s median single-family home price is $264,600. Rodas said she likely will have to move to Vineland for an affordable home.
Rodas and others like her six months ago would have been able to obtain loans for pricier houses quickly, no matter what their credit or income, Sinclair noted.
“Buyers need to understand that … in the long term this is good, this is helping to correct the market,” Sinclair said. “It is a good thing, as bad as it seems.”
One of those is Atlantic Coast Mortgage. Not long ago, a prospective homebuyer could obtain a second mortgage, “no doc” loan and easy 100 percent financing. Those loans recently comprised 25 percent of the company’s business, but have dwindled to nothing, Vice President Jim Malamut said.
The office has “been nuts” during the past month, Malamut said. Atlantic Coast Mortgage has received e-mail notifications of changed guidelines, products being eliminated and assurances from lenders that they are not, like so many others, collapsing.
“It definitely hurt our bottom line. … I’m sure it’s hurt everybody out there. It’s just a reality check,” he said.
Tighter restrictions are “certainly going to impede a lot of people from purchasing homes,” said Joseph Heisler, president of the New Jersey Association of Mortgage Brokers. “First-time buyers are going to be more dramatically affected because of the lack of the lower down payment types of programs like FHA or loans with 100 percent financing.”
Tougher credit requirements also could hurt local casino workers, noted Karen Thompson, manager of Liberty Mortgage Services in Ventnor. Liberty Mortgage handled a lot of alternative loans for casino workers who relied on tips, making it harder to document their income and build up credit if they used mostly cash.
“There’s a lot of people that expect us to do miracles because that’s pretty much what we were able to do before,” Thompson said. “I mean, who in the world ever heard of, ‘Hey, no money down, your credit score is 580, and no money out of your pocket?’ Now forget it. It’s not happening.”