New rules pull rug from under house deals

RENO, Nev., Aug. 5 (UPI) -- Lending rules at U.S. finance companies are changing quickly, eliminating some deals that were previously given the green light, industry observers said.

In Sparks, Nev., Dr. Drake Paul lined up a buyer for his $170,000 home. The buyer's loan was approved, the inspection done, the appraisal completed, USA Today reported. But, two days before the closing, the deal was canceled when lenders bumped the down payment requirement up by $25,500, the newspaper said

"Who can afford that?" asked Paul. "A person that that can afford a $170,000 house does not have $34,000 in cash," he said.

"Before, if you could fog a mirror, you got a loan," David Olson of Wholesale Access Mortgage Research and Consulting told the newspaper.

"Now, that's not the case," he said.

New approvals for riskier loans categories, such subprime and Alt-A loans, which made up 40 percent of the residential lending business have all but disappeared, USA Today reported.

"The only people who have a shot in this market are those with no house to sell, who have a good income … and have a good down payment," said Dean Moss, a real estate agent in Chicago.

"That's a small percentage," he told USA Today.