More than a year after the subprime-lending collapse, mortgage brokers on the front lines are still contending with a blitz of industry changes that are making it harder for them to earn a living.
"It's like being punched in the back every time you turn around," said Michael Dougherty, managing partner at privately held Choice Mortgage L.L.C. in Mount Laurel.
Some of the changes, which are contributing to the slow housing market, push brokers to get bigger down payments, or to require higher credit ratings from borrowers.
Dougherty and others on the retail end of the mortgage industry said efforts by Congress and the Bush administration to boost the mortgage market through a temporary boost to loan limits at mortgage finance companies Fannie Mae and Freddie Mac, and other measures, had accomplished little so far.
"The industry is still going in the other direction" as it tries to figure out how to lend to people who will make their payments, said Dougherty, referring to the big players whose rules he has to follow.
Regina M. Lowrie, president and chief executive officer of Vision Mortgage Capital L.L.C. and former chairwoman of the Mortgage Bankers Association, said Wall Street, which flooded the housing market with money during the real estate boom, was forcing a retreat "to the basics of prudent underwriting."
"They've had to do that in order to try to improve liquidity in the secondary market and give investors confidence in mortgage-backed securities," Lowrie said.
At the same time, Lowrie is critical of Fannie Mae's tightening. "I'm of the opinion that this is not the time when they should be doing that," because it conflicts with the company's government mandate to make home mortgages more affordable.
Fannie Mae spokeswoman Amy Bonitatibus said, "Our recent underwriting changes will help prevent" borrowers from getting mortgages they cannot afford long term.
Some of the Fannie Mae changes could be described as a push to get borrowers to make bigger down payments.
Others demand better credit. For example, starting this month, there is a firm rule that anyone who was 60 days late with a mortgage payment in the previous 12 months is not eligible for a loan that would be sold to Fannie Mae.
"It used to be that based on other strengths of your loan application, you might have been able to get by with that," said Dougherty, whose five-year-old company's best year was 2006, when it sold $88 million worth of mortgages. He estimated that Choice Mortgage's volume this year will be $35 million.
The mortgage-insurance industry has also been cracking down, establishing tighter underwriting standards for markets that are seeing the biggest declines in house prices.
One executive said that phase of industry retrenchment might be coming to an end.
"I think the next wave of changes will be related to pricing rather than credit," said Jeff Cashmer, senior vice president of national sales at Radian Guaranty Inc., a Philadelphia mortgage insurer.
"We will be out in the next couple of weeks with our price changes, increases for the most part," he said.
One bright spot in the mortgage industry is borrowing insured by the Federal Housing Administration, which last month expanded eligibility for its FHASecure loans.
That program, announced in September, was initially only for borrowers who were facing delinquency because their adjustable-rate mortgage had become too expensive, but otherwise had sound credit. The problem was that borrowers only had those loans in the first place if they had poor credit.
It is too soon to say how effective the expanded program will be.
On the other hand, the FHA next month will start charging borrowers more or less for insurance premiums based on credit scores, a significant departure from its long-held practice of charging all borrowers the same rate.
As it is, the FHA is swamped, said Engram A. Lloyd, director of the FHA's Philadelphia Homeownership Center, which is part of the U.S. Department of Housing and Urban Development and covers 15 states. "Production at our office is at an all-time high since 2002," he said.
Behind that boom are brokers such as Ricky Boone, president of Excel Capital Funding Inc. in Trevose, who is getting much of his business through the FHA.
Otherwise, it is tough to get loans through.
"It seems like they want it to go back to where it was 20 years ago when you needed 20 percent down and a 720 credit score" to get a loan. The median score in the United States is 723.