Mortgage crunch has even wealthy buyers scrambling for credit

The San Francisco Chronicle reports:

Mortgage woes have moved upstream, landing even in tony neighborhoods.

The credit crunch now is hitting home buyers from all walks of life, not just subprime borrowers with poor credit. That in turn could mean fewer buyers - and lower prices.

For instance, a multimillion-dollar deal in Larkspur went belly-up last week when the lender yanked the financing at the last minute.

"Everything was perking along smoothly. All contingencies were removed," said Bill Hogan, a Realtor with Coldwell Banker in Greenbrae, who sold the four-bedroom home for $2.45 million and expected to close the deal later this month. "The loan was approved and locked in. People were ordering moving trucks, everyone was feeling euphoric."

On Thursday, the couple buying the house learned that their lender was rescinding their loan because they were making only a 10 percent down payment.

"All of a sudden the lender, because it is backed by a series of investors that are feeling very shaky and panicky, decided it could no longer honor the loan commitment," Hogan said. "This was not a subprime loan; this was fully documented, people with outstanding credit who own a $5 million home now and didn't need to sell it to buy this one."

Is the mortgage market going back to the old days of "20% down and 2.5 times your income"? You might say the market,in a very short time,views lending mortgage money a lot different than a 30 Year Treasury Bond.