Oregon Public Broadcasting

Sometimes the ‘national credit crisis’  can feel a long way off. For many people, it hasn't had an impact on their own ‘day-to-day’ experiences.  But as Kristian Foden-Vencil reports, there are local effects and some people are already suffering.

Stacey Widick makes about $45,000 a year as a procurement analyst for Multnomah County. She has two teenagers and always wanted to buy a house. But she could never quite save enough for a down payment. 

So she went to an organization called the ‘Portland Housing Center.’ It put her through home buying classes and helped her save $8000. She then found a condo and started looking for a mortgage.

Stacey Widick: “The preferred lender was Bank of America, the preferred lender for the condos … I started working with a gal from B of A. I was approved and then the next day I wasn’t.”

The bank didn’t say why, it just suggested she find another lender.

Stacey Widick: “So by the time I started talking to another lender, B of A came back and said, no wait, we can do this for you. It’s going through underwriting, it’s going to be great. And I let the other lender know what was going on. Then B of A called back again and said that they weren’t able to do it.”

Through the grapevine, Widick learned that the bank wasn’t convinced that prices in the Portland condo market were going to rise. So it didn’t want to invest.

Michelle Puggarana with the Portland Housing Center, says Widick’s experience is far from unique.

Michelle Puggarana: “So some of the lenders that were there are just gone. We’ve had a couple of banks that we work with who completely shut down their mortgage lending operations.”

As you can guess, fewer lenders means fewer options for buyers.

Puggarana  says the credit crunch is causing other problems too.

Michelle Puggarana: “I’ve been working at the Portland Housing Center for about six years. And I remember when I first started working there, we were pretty much telling people that if you can get your credit score up to about 620  and you have a little bit of a down payment, it’s likely that you can go out and get a good loan. Now we’re definitely telling people that you need a 680 credit score to get a good loans.”

The difference between 620 to 680 is the difference between paying your bills on time and being late on a couple of payments for a couple of months.

Puggarana says the credit crunch has had other repercussions.  For example, the IRS has shut down at least one local ‘payment assistance program’ for those with tax problems. And the Federal Housing Authority is also requiring larger down payments for loans it insures.

Jon Gail is with  the Portland Development Commission. He says coming up with a down payments is one of the biggest stumbling blocks facing buyers.

Jon Gail: “With changes in the credit markets we’re now seeing it’s common to require 10 percent down. Which for a first time homebuyers on a $200,000 home, could be as much as $20,000 cash. First time homebuyers really don’t have that cash and therefore are really closed out of the market altogether.”

Other effects of the crunch can be seen on your credit card. Companies are simply cutting the amount they’re willing to lend – a good thing say some economists. But it could be a problem if you suddenly need to max-out your plastic in an emergency.

And it’s not only individuals who’re being squeezed. Businesses often need credit for their everyday needs – like meeting payroll each month.

There’s another aspect to this story, however. One which illustrates the harsher side of capitalism. At least one local real estate agent is starting weekly bus tours around foreclosed homes in Portland.  So people who didn’t overextend themselves in the boom times -- and have good credit – can take advantage of the deals provided by those less fortunate or less savvy.

Meanwhile, remember Stacey Widick -- who wanted to buy a condo in Southeast Portland. She eventually managed to get a loan and is happy to now own her own home.

Stacey Widick: “I’m glad that I’m paying a mortgage because I was ready to just go back to renting because it was such an awful experience.”

She concedes that the bank was right -- only four of the 14 condos in her block have sold and prices have dropped.  But she says, she’s in it for the long run and she’s hopeful  the market will rebound -- eventually.