- The Washington Times - Monday, October 20, 2008

As the credit crunch filters down from Wall Street to Main Street, it’s more than the investment bankers who feel the squeeze. William Darter, a retired real estate developer who now lives in Melbourne, Fla., lost a $3,000 investment in Washington Mutual Inc. While it might not sound like much to most, it’s a considerable sum for someone living on Social Security payments, he said.

“I’m hurting pretty bad as an individual,” said the former manager for Prudential Insurance Co. Mr. Darter also lost money in Wachovia Corp.

He supported the bailout package, and he said most of those who opposed the bill had misconceptions about it.

“All they hear is this is a bill to bail Wall Street out,” Mr. Darter said. “There are lots of little people like me who are going to lose” money if Congress did nothing.

For college students, the economy is a growing concern. Donald Bosse, director of financial aid at Catholic University of America, said students with loans have been insulated from the financial crisis because their loans for the year were set in June.

“The earliest it would hit us would be February,” he said.

However, he noted, the school has seen more complaints than in previous years. Most stem from credit-score requirements for loans, which have gone up. Although students wouldn’t be denied loans, they may have to pay more.

Mr. Bosse said his office will contact students whose loans are through one of the banks in trouble in the spring to make sure they still have their loans.

At Gallaudet University, staff interpreter for the deaf Steve Walker is concerned about the funding the school receives from Congress.

“I wonder how it will affect the university in the long run since so much money will be going to pay off the credit crisis,” he said of the bailout.

Local businesses that rely on loans are, predictably, taking a hit.

Business has plummeted by more than 60 percent at the family-owned Mr. Car Auto Sales in Brentwood, according to President Daniel Burneo.

“People have issues with credit in this area,” Mr. Burneo said, referring to a neighborhood where cars are sold best via fliers or word of mouth. His business asks for a down payment of 40 percent to 50 percent on most sales and prefers financing of no more than 18 to 24 months.

With financing involved in more than 94 percent of all vehicles purchased at a dealership, according to the National Automobile Dealers Association, that’s a lot of people looking for loans.

“The only people having trouble getting loans would be considered the subprime, or high-risk, customers,” said Jack Fitzgerald, president of Fitzgerald Auto Malls, based in Kensington.

Psychology plays a part, Mr. Fitzgerald noted, saying “business slowed down considerably due to people assuming they cannot buy automobiles. It all happened when the media started talking about the financial crisis.”

CarMax Inc., a dealer in secondhand cars, saw business decline by 13 percent in an August report, before the real crunch hit.

“We’re still offering auto financing through stores as well as five other lenders,” a spokesman for the Richmond-based company said.

Realtors report that credit scores are more important for buyers than they have been previously.

“Some buyers find that out by being surprised that their score isn’t as good as they thought,” said Gary Jankowski of Coldwell Banker Residential Brokerage on Capitol Hill. Some home prices have dropped, but Capitol Hill has managed the storm quite well, he reports, with sellers opting to rent out property rather than sell if they bought it in the last couple of years.

“I’ve seen a lot of [Federal Housing Administration] loans - more than usual, where they get in with 3 percent [of the purchase price],” Mr. Jankowski said. “Those seem to be carrying the day.”

“What is happening is more people are trying to get in with less money. If they don’t have money, they are going to their families for gifts,” said Renee Voyta of First Savings Mortgage Corp. in Bethesda. “And people are borrowing against retirement. There still are people out there shopping. There still is financing, and there still is money in the mortgage market.”

A recent customer of hers “just found the house he wanted after a year of looking. The cost was $490,000, and he put down $100,000 of his own money. Looking at a fixed-rate loan such as the FHA with 3 percent down is not like we are asking a lot. But people need an income to support payment.”

“It’s different from a year ago. Guidelines have changed,” said Mike Massella, office manager at the same firm. “The biggest thing is equity in homes can’t be tapped as well. When somebody is looking to buy a home, we try to fit it into a program that is best for them. And either they get gifts or go into their 401(k)s. We’re going back to old credit standards.”

The days when a buyer could get a loan with no money out of their pocket are gone, he said emphatically.

“At one point all you needed was a credit score and a pulse to get one of these loans, and in some circles, the pulse was optional,” said a half-joking Kevin Forbes, chairman of the department of business and economics at Catholic University, quoting his next door neighbor, a small-business owner.

Mr. Forbes and his wife refinanced their house in December, assembling the necessary documentation ahead of time.

“Then the mortgage company said, ‘You don’t need that.’ I guess they [only] needed our credit score and our pulse,” he said. “Now documentation [required] is simply out of sight. We see the same thing with car loans. What is being asked is a higher rate. It has been estimated that General Motors is losing 10,000 to 20,000 vehicles a month.”

The family-owned National Capital Bank of Washington on Pennsylvania Avenue in Southeast recently sent a letter reassuring its depositors, that “NCB does not sell its loans to outsiders.” The bank currently supports $192 million in loans of all types and has “not one past-due payment,” said President James M. Didden. This is possible, he adds, because “we never changed our values. We require 20 percent down on a house and 25 percent on commercial loans. If you underwrite loans in a safe and sound way, then you end up with a safe and sound institution.”

Heather Cobun, Jeffrey Canning, Kara Rowland and Christopher Shaver contributed to this report.

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