Penn resident Tim Scoff has first hand knowledge of housing market havoc caused by the national mortgage crisis.
Scoff was just three days away from closing on the sale of his former home in Sharon for about $55,000 two months ago, when a potential buyer suddenly lost financing and couldn’t go through with the purchase.
“It’s hitting everyone, both buyers and sellers,” said Scoff, who now finds himself paying for upkeep of two houses, including his new home on Concord Drive in Penn. “With a mortgage, the cost of utilities and paying someone to cut the grass, it’s costing me between $600 and $650 to maintain my house in Sharon.”
Such tales are common in Pittsburgh and across the nation, as healthy lenders tighten standards and an increasing number of unhealthy ones stung by nonperforming subprime loans — those made to people with poor or bad credit — either cut back or stop issuing loans altogether.
The result is that more potential homebuyers judged to have borderline credit standing may not be able to get financing at all. Even those with solid credit histories may be asked for proof of their income or credit, when merely their word was sufficient just a few months ago. In still other cases, lenders have stopped offering no downpayment loans, also referred to as 100 percent loans, which have been popular with first-time homebuyers.
Several major home lenders have curtailed operations or shutdown.
William Hughes thought for a time that problems at American Home Mortgage Corp. would derail his effort to purchase a home on Sherman Avenue in Etna. American Home closed shop on its mortgage business in late July.
“They (American Homes) called the day before the closing … and said they would have to delay issuing the mortgage in time,” he said.
Thanks to help with paperwork by an uncle who is a real estate agent, and assistance from Tom Antos, a loan officer with Omega Financial Services Inc. in Carnegie, Hughes, 26, was able to secure a new mortgage in two days to meet his closing on Aug. 9.
“Originally, Omega thought my mortgage interest rate — which was 5.85 percent with American Home — would be have to be 6.4 or 6.5 percent, but they were able to convince the lender to accept the lower (5.85 percent) rate on my $87,000, 30-year fixed rate mortgage,” he said.
Institutional and other investors have been shying away from buying some mortgage-based securities on the secondary market denying subprime lenders funds to issue new loans. And although there were recent reports of some investors sensing buying opportunities, don’t expect any easing of the situation soon, said Gregory M. Drahuschak is first vice president of Janney Montgomery Scott Inc., Pittsburgh.
Karen Puc, a mortgage broker with Abby Mortgage Inc. in McKeesport, helps arrange financing for customers buying homes through the Howard Hanna Wilson Baum real estate agency in McKeesport. She’s been scrambling to get new lenders for a number of buyers who had mortgage applications submitted to Greenpoint Mortgage, a unit of Capital One Financial Corp. that last week stopped issuing loans.
“Greenpoint has said they will honor loans already in their pipeline, but one of my customers just submitted an application to them, so I have to find new financing for him,” Puc said. “We’re having a hard time placing anybody that doesn’t have excellent credit.”
Another of her customers is getting new financing, but with different terms than he initially had with Greenpoint, she said. “He’s going to have to pay for mortgage insurance, which will add $45 a month to the cost of his $41,000 loan,” she said.
She has seen other buyers affected by the declining availability of 100 percent loans in the region.
Nationally, four out of 10 first-time buyers used that type of loan for mortgages in 2005 and 2006, according to the National Association of Realtors.
“Some people I could have qualified at 100 percent are now only able to get 90 percent because lenders tightened credit standards so much,” said Puc of Abby Mortgage. “Some people I can’t qualify anymore because they have less than perfect credit, and while lenders used to work with them, now these people have gotten pushed out of the market.”
Robert Itskowitz didn’t have that problem when he and his wife, Shelly, were in the process of buying new home on Bartlett Street in Squirrel Hill.
But the couple did have to find a new source of financing when American Home closed last month.
“He was a very solid customer, but his biggest issue was being able to close his loan on time,” said Peter Bauer, a loan officer with Howard Hanna Financial Services.
“Our real estate agent working with him asked me to help,” said Bauer. The Howard Hanna unit agreed to finance the purchase for the same terms Itskowitz had with American Home — a 30-year, fixed rate mortgage, secured at 6.125 percent interest.
“Howard Hanna has their own underwriters and lending program and were able to pick up the loan,” said Itskowitz, who works for Kforce Inc. a professional services firm based in Green Tree.
Thanks to its intervention, the closing took place Aug. 7, just over a week after the initial loan deal fell through.