(Host) Turmoil on Wall Street and in Washington has many Vermonters wondering how the banking crisis will affect their ability to get a mortgage or business loan.
VPR’s Nina Keck talked with several Vermont bankers and mortgage experts to find out.
(Keck) Because of the stock market’s uncertainty, many bankers say deposits are up as investors move their funds into more conservative and insured money market and CD accounts. That means banks have more money to lend. But will consumers and small business owners have access to it?
First, it’s important to realize that business loans and home mortgages are handled differently. Home mortgages follow the standards set up by the government’s Fair Housing Administration, or Fannie Mae and Freddie Mac. Business loans tend to be handled in house by individual local banks. Michael Seaver is President of Chittenden Bank.
(Seaver) "For businesses here in Vermont, they should see very little if any impact. Fortunately, I think Vermont banks have been very responsible in the types of investments that we have made. Chittenden had no exposure to the sub prime market, nor did we have any exposure to the different institutions that have recently gone out of business in the last few weeks."
(Keck) Seaver says the fact that Vermont’s a small state means bankers often know the businesses they’re lending to quite well, which helps. Ron Hance, President of Heritage Family Credit Union, agrees. But he says when it comes to home loans, there are still some questions.
(Hance) "From our perspective it depends on what happens to Fannie Mae and Freddie Mac eventually. Right now, we’re still continuing to sell mortgages to them and given the relationship that we currently have, we have an inexhaustible supply of funding that is available to us. So if that dries up, then we will have problems, but if it doesn’t then we will continue to do business as usual."
(Keck) While mortgages are still available, Erika Glidden, a mortgage specialist at Opportunities Credit Union in Burlington, says they’re much more difficult and costly to get, especially if you’ve got a less than stellar credit history.
(Glidden) "Vermont Housing Finance Agency – VHFA used to allow people who had between a 660 and a 680 credit score to get a 100% financing and not require a down payment. That has been raised to a 720 so it’s a lot tougher for people of average income – average credit to get a mortgage without needing 3-5% down."
(Keck) It’s a big adjustment for consumers. But Glidden says what lenders are doing isn’t new. They’re simply returning to the solid banking practices that she says somehow got left behind during the most recent real estate boom.
For VPR News, I’m Nina Keck in Rutland.