From the Philadelphia Daily News:
Lisa Meserole was two weeks away from closing on her new 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 some housing markets have been affected by the national mortgage crunch.
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, N.J. “And there is literally no recourse.”
So far, most of the pain has been felt in towns where first-time buyers tend to look for homes. 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. 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, N.J.
“Today [the lender] might do the deal, tomorrow they might not,” said Phyllis Gallucci, president of mortgage broker Platinum Capital Group Inc. in Lincoln Park, N.J. Her company lost three transactions in one day when American Home Mortgage collapsed this summer. “We’re just trying to find other lenders,” she said.
As a result of this funding crunch, about 20 percent of would-be buyers have been squeezed out of the housing market in middle-class towns, said Fernando Semiao of Century 21 Semiao and Associates in Lyndhurst, N.J. His office has seen at least two transactions fall apart when the mortgage money vanished.
Semiao said he is taking extra steps to check buyers’ qualifications and protect sellers from losing time with buyers who have shaky financing and won’t be able to close.
Similarly, Ivana Crecco of Camelot Realty in Hackensack, N.J., 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.