Tighter lending rules may hurt

Fewer qualify to buy homes

Raleigh Realtor Gary Hooker already has lost three sales to first-time homebuyers since lenders this month began cracking down on easy mortgage money.

But his real worry is the effect that tougher restrictions on subprime borrowing may have on the Triangle's unsteady housing market.

"I don't think we've scratched the surface how it will turn out," said Hooker, owner of United Real Estate and Investment Group.

Facing record defaults, mortgage lenders who make subprime loans -- made to buyers with poor or limited credit histories -- have tightened guidelines. The effect may delay the industry's recovery until sometime next year, said Moody's.com economist Michael Helmar.

"It's a big deal," he said. "It's coming at a time when all regions need it the least."

Although 2006 was a record sales year, Triangle home sales have been sputtering largely because people having trouble selling their homes in other parts of the country couldn't buy homes here. Fourth-quarter sales were down 7.6 percent compared with a year ago.

Before the bust, subprime loans helped fuel a nationwide housing boom as borrowers who couldn't be approved for conventional loans bought homes with no money down and negligible interest rates. Up to a quarter of the homes sold in North Carolina in 2006 were bought with subprime loans, according to industry estimates.

Today, those loans are being blamed for a record number of foreclosures in the Triangle and the state last year.

This week, the Mortgage Bankers Association reported that delinquency rates for mortgage loans and loans in foreclosure rose during the fourth quarter in North Carolina, compared with the previous three months. The state ranks 15th in the number of delinquent loans and 21st in inventory of homes in foreclosure.

Although about a dozen subprime lenders have closed in the past two months, there still are dozens of companies issuing the loans, albeit with tighter guidelines.

Hooker said his clients weren't able to get mortgages because they could not meet a new requirement for a 5 percent down payment.

Also this month, Advantage Lending in Raleigh said it has turned away about 10 customers because of tighter credit and down payment guidelines.

Mark Timberlake, a mortgage broker at Allied Home Mortgage Capital in Cary, said two potential buyers left empty-handed when they found out they needed big down payments to buy investment homes. Before, he said, they could have borrowed the full sales price. Now they need 10 percent up front.

"There are ... people who were able to qualify for loans in the past few years who aren't going to be able to get loans," said John Crawford, a mortgage banker in Greensboro and president of N.C. Mortgage Professionals, an industry employee group. "But if it hurts the mortgage industry, it will hurt the housing industry and it will trickle down to a lot of other industries."

(Staff writer Sabine Vollmer contributed to this report.)