From the Record:
Lisa Meserole was two weeks away from closing on her new Hackensack condo when she got a shock: Her lender, American Home Mortgage, was not going to fund her loan — or for that matter, any loans — because the company was filing for bankruptcy.
“You want to know stress?” Meserole said. “I thought I wouldn’t have a place to live — where was I going to go?”
Meserole’s mortgage broker scrambled and found another lender for her, and she bought her condo in mid-August, as scheduled. But her experience throws a spotlight on how the North Jersey housing market has been affected by the national mortgage crunch — especially in the more affordable towns where first-timers buy houses.
The fallout includes:
• Buyers who, just a few months ago, would have been able to buy without a down payment or even proof of their income now find that’s no longer possible. Many have dropped out of the market.
• Other buyers have to pay more for their loans. Interest rates on jumbo mortgages — more than $417,000 — have climbed to an average of about 7.4 percent, though some regional banks are offering lower rates.
• In the most extreme cases, house sales just fall apart. “I have had two closings die at the table because the banks could not fund [the mortgage],” said Crystal Burns, an agent with Re/Max Advantage Plus in Teaneck. “And there is literally no recourse.”
In Wayne, Coldwell Banker agent Bob Lindsay has a sale that is supposed to close Monday. His clients, the sellers, have booked a moving van and are ready to go.
But last week, the buyer’s mortgage lender, First Magnus Financial Corp. of Phoenix, filed for bankruptcy, and the buyer’s mortgage broker began searching for another lender. As of 6 p.m. Friday, Lindsay still had not heard whether the financing is in place.
“If the sale doesn’t go through, what do they do?” Lindsay said of his clients.
So far, most of the pain has been felt in towns where first-time buyers tend to look for homes, such as North Arlington and Bergenfield. In these areas, many recent buyers had used no-down-payment loans and other non-traditional mortgages to get into a high-priced housing market.
But mortgage lenders have stopped writing these risky loans, because Wall Street investors, spooked by a rise in mortgage delinquencies, no longer want to invest in them. And mortgage lenders’ requirements for borrowers have been changing overnight in response to the mortgage turmoil.
“We’ve seen people who thought they had a 5-percent-down mortgage who now need to put 10 percent down,” said Teri Gamble of GoldStar Realty in Oradell.
Similarly, Ivana Crecco of Camelot Realty in Hackensack said she is not working with any buyers who don’t have a down payment and a decent credit score.
“I won’t waste my time, because I know the deal won’t go through,” she said.
Even buyers with good credit have recently found that in a world of tighter credit and slumping house values, bank appraisals have become unforgiving. Geraldine Tecchio of ERA Nalbandian in Saddle Brook said she has worked on several deals where the appraiser valued the house at less than the sale price. In those cases, the bank refuses to write the mortgage for the amount needed. Either the seller lowers the price or the deal falls through, she said.