Delawareans may find more rigorous approval demands

Delaware State News

DOVER — The past couple of weeks have had people waiting and watching to see where the future of the financial system would end up.

It started with the collapse of Lehman Brothers, a 158-year-old investment bank, which announced Sept. 15 its intention to file for bankruptcy. That was just the start of more banks and investment companies either crashing or being bought out by other firms.

Then, the federal government decided to swoop in and save the financial system with an unprecedented $700 billion bailout plan

The initial bill was turned down by the U.S. House of Representatives, but a reworked plan passed Congress on Friday.

The core of the plan is to let financial institutions sell their troubled assets, mostly mortgage-related, to the government.

Even though the financial system might have a steadier stance now, those in search of credit of any kind may still find that banks are tightening up.

"Marginal borrowers are less likely to get a mortgage at this time," said Douglas Moore, president of Kent County Association of Realtors.

Mortgages, car loans, student loans and other lines of credit are still available, but most are saying that criteria to get approved are more rigorous than they have been in past years.

"I’ve been a counselor for 20 years, and this has been a bad year," said Mary Rammel, branch manager for Consumer Credit Counseling Services in Wilmington, adding that her company has seen record bankruptcies and home foreclosures this year.

"If you are strapped already, don’t take on more debt," she advised. "The less debt you have, the easier it is to take on surprise expenses, like the extra price for gasoline."

Mr. Moore is advising his clients in much the same way when they are looking at new homes — don’t borrow beyond your means. He has seen an increase in buyer activity, with more people looking to purchase a home. People are being more conscientious about what fits their needs, he said, both physically for the family and financially for their budgets.

And banks are being more vigilant, too, Mr. Moore said.

"Obviously, with what’s happened, the pendulum has swung from very loose to very tight," he said. "It’s got to come back to somewhere in the middle."

Even Jeff Townsend, owner of Townsend Brothers Chevrolet car dealership in Dover, is seeing banks upping their requirements.

"They’re being a little more picky with what they’re taking," he said. "People need to be really conscientious on paying their bills on time to make their credit as good as possible."

So far, colleges and universities are seeing stability with student loans, especially with many loans federally funded. But the private lending sector is a different story.

"Private lending has been in a little bit of turmoil lately with companies coming and going," said Jim Holloway, assistant director of financial aid at the University of Delaware.

So far, the university hasn’t heard of many students experiencing issues with student loans, he said, but it’s early in the semester and things may change, adding that he doesn’t think the brunt of the crisis has trickled down to the student loans.

"Don’t be scared; be cautious and read everything," said J. Lynn Iocono, director of student financial services at Delaware State University, about students researching the loans the accept. "They can’t stop going after education ... but they need to look beyond today of just getting that check."