"Now, I'm just barely making it," he says. "I used to have a steak once or twice a week; now, I'm going to have hot dogs and beans. We used to go to the movies, but we're giving that up."
E-mail alerts about tighter loan standards and higher interest rates from lenders nationwide flooded the in-boxes of employees, mortgage brokers and real estate agents late last week.
"Today alone, I had interest rate changes to loan products from nearly every lender I work with," Pava Leyrer, president of Heritage National Mortgage in Grandville, Mich., said Friday.
Lenders are changing their terms and criteria for borrowers so fast, she said, she can no longer make promises. "A loan may look like it should go through, but until I get all the documents and get to the closing table and have the funds, I don't know."
One would-be home buyer was ready to sign the final documents last week, only to find the lender couldn't come up with the money. Fidelity National Title in Bloomfield Hills, Mich., sent an urgent e-mail about it to all of its brokers, saying: "Our office has just been notified that a purchase closing, being held in our office right now, will not fund as a result of ABC's (American Brokers Conduit) inability to fund ANY loans until further notice."
American Home Mortgage Investment ahm, based in Melville, N.Y., which owns ABC, fired more than 6,000 employees last week and stopped taking loan applications; Monday it filed for bankruptcy protection. NovaStar Mortgage nfi of Kansas City, Mo., said Friday that it "is temporarily suspending approval and funding activity." And Accredited Home Lenders lend from San Diego said it may have to stop making loans and seek bankruptcy protection.
Michael Strauss, American Home's CEO, issued a statement explaining that investors' appetite for mortgage-backed securities and the national housing market "have deteriorated to the point that we have no realistic alternative."
Those sentiments, which sparked the selling on Wall Street Friday, will likely weigh on the Federal Reserve board, which meets Tuesday to set short-term interest rates. While most economists do not expect the Fed this week to cut interest rates, several, including those at investment bank UBS, are now forecasting that the Fed will begin lowering rates in the next six months.
Contributing: Sue Kirchhoff