The credit crunch that began with the meltdown of the subprime mortgage market has spread to affect even borrowers with good credit, according to Bloomberg News.
Lenders increasingly are refusing to lend to homebuyers who can’t make a down payment of more than 5 percent, especially if they don’t document their income. Such “Alt A” borrowers accounted for 20 percent of the $3 trillion U.S. mortgage market last year, about the same as subprime loans, according to Credit Suisse Group. But Ivy Zelman, a Credit Suisse analyst in New York, told Bloomberg she expects Alt A loans to decline by about one-quarter this year and subprime mortgages by half as the market tightens.
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“It’s going to be very difficult, if not impossible, to do a no-money-down loan at any credit score,” Alex Gemici, president of Parsippany, N.J.-based mortgage bank Montgomery Mortgage Capital Corp., told Bloomberg. Companies that buy such loans “are all saying if they haven’t eliminated them yet, they’ll eliminate them shortly.”
In the past two weeks, Bear Stearns Cos., General Electric Co.’s WMC Mortgage, Countrywide Financial Corp., IndyMac Bancorp Inc., Goldman Sachs Group Inc., Lehman Brothers Holdings Inc. and Credit Suisse – which buy loans and repackage them for sale as bonds – have all said they’re pulling back from buying Alt A mortgages from no-down-payment or full-value mortgages, Bloomberg said.
