Mounting foreclosures and the subprime mortgage crisis have contributed to a national credit crunch, making it more difficult for borrowers to qualify for a mortgage loan.

Standards for home mortgages also are getting tougher in Wisconsin, especially for loans that banks pass on to national mortgage wholesalers.

Recent changes in Wisconsin lending standards include:

The minimum FICO credit score of 700, once considered excellent, has crept upward at some banks to 720. Consumers with credit scores lower than 680 are having more difficulty getting a mortgage. (A FICO score is a credit score developed by Fair Isaac Corp.)

Banks are less willing to make loans with higher loan-to-value ratios. An 80 percent ratio, for example, means that the loan is for 80 percent of the home 's value.

As the steady rise in home values of a few years ago has ebbed, drive-by or quick property appraisals are gone and most banks now require full appraisals for mortgages and some home equity loans.

Area mortgage brokers, who shop a variety of lenders for their clients, say loan decisions now take longer because some banks have cut back on their loan staffs.

"The market has walked away from low credit scores, high loan-to-value and stated-asset-type loans, " said Ron Steinhofer, president of the Wisconsin Mortgage Bankers Association and manager of M&I Marshall and Ilsley Bank 's regional home lending group.

In stated-asset loans, lenders accept the assets claimed by the borrower without requiring proof.

Steinhofer said counting the number of mortgages a bank issues year to year isn 't a good way to determine whether a bank is tightening credit because that number can change due to market and interest rate fluctuations.

He said that M&I Bank, for example, wrote three times the number of loans it expected during January and February in the Madison market when interest rates dipped near historic lows and many homeowners sought refinancing.

Steinhofer said Wisconsin banks haven 't tightened credit as much as elsewhere because the state already had fairly conservative lending standards.

Tougher credit climate

But the tightening climate is evident in interviews with those working in the local mortgage industry.

"I would say, yes, there has been a general tightening in credit review, " said Jim Bradley, president of Home Savings Bank of Madison. "There are many factors that go into making a loan decision. The universal factors now are looked at in a different light. "

With a net loss of $14,000, Home Savings Bank was one of 21 Wisconsin banks to lose money in 2007.

Associated Bank has made minor adjustments to its credit standards, said chief credit officer Gordon King. "There has been a general tightening in the FICO score, " he said. "Banks may have said 700 and above is an "A, " now it 's 720. "

Loans with high loan-to-value ratios, including those with no down payment, are harder to find than they were two years ago and borrowers need higher credit scores to get them, said Joe Theisen, a mortgage broker with Fairway Independent Mortgage of Sun Prairie.

"There 's no question that banks and other lenders are nervous, " he said. "They 're worried about values and they 're taking some hits with defaults. "

Wells Fargo & Co. announced recently that it has tightened its mortgage lending in 200 markets nationwide that it considers soft or distressed. Those include Wisconsin 's Pierce and St. Croix counties, which are east of Minneapolis-St. Paul.

Drive-by appraisals

Drive-by or quick appraisals sometimes used during the home sales boom a few years ago have disappeared.

These kinds of appraisals, which represented about 5 percent of the local appraisal market, relied on assumptions that property values would continue to rise, said Nick Rahn of Dane County Appraisal of Madison.

"I don 't think you can make those assumptions anymore, " he said, "It was more lenient when the market was continuing to increase and there was less risk. "

Gene DeYoung of DeYoung Appraisal Service in Madison said he hates drive-by or quick appraisals and is glad they 're gone. He said they sometimes were used to inflate home values to help people qualify for loans.

"It was a total abuse, " he said. "You will find that type of thing is quite often the reason for foreclosures. "

Surviving the fallout

Chris Lowrey, a mortgage broker with the Mortgage Store, 3682 Kinsman Blvd., said she believes some Wisconsin banks are reacting to the national credit crunch by cutting back on home loans.

"It 's not that there aren 't programs out there to help the industry, " she said. "Banks just don 't want to lend money right now. They just want to get through the fallout. "

Lowrey said some banks have cut their home-loan staffs and she 's had to wait two or three weeks to see if a loan has been approved.

Theisen said he also has noticed that bank loan approvals take longer.

"When the market slowed, a lot of them did cut staff, " he said. "A lot of people have exited the mortgage industry -- appraisers, underwriters, brokers. "

Bradley said his bank hasn 't cut any of its loan staff. "We 're very interested and willing to make loans, " he said.

House values declining

Flat or declining home values can make it more difficult to get a home equity loan or refinance a mortgage, Lowrey said. She recently turned down a customer who wanted to refinance a loan when she discovered the home 's value had dropped by $15,000.

Median sale prices for existing homes, an indicator of home values, have been mostly flat over the past year in south-central Wisconsin, but the Dane County median sale price declined to $205,000 in January from $219,400 in January 2007, according to the South Central Wisconsin MLS.

Wisconsin had 622,755 mortgages in effect at the end of 2007, according to the national Mortgage Bankers Association. The number of new mortgages statewide peaked in 2003 at 485,317, mostly due to homeowners who refinanced to take advantage of low interest rates.

In 2006, 98,451 mortgages were issued in the state for new purchases, the third highest annual number of the decade and the latest year that mortgage-origination data was available through the Home Mortgage Disclosure Act.

Banks borrowing money

Banks once operated more independently. They would take in money from deposits and send it out in loans.

Now, banks often borrow money to lend and sell mortgages to wholesalers so the banks can use that revenue to make more loans.

When credit tightens up nationally, it affects Wisconsin banks that participate in the secondary mortgage market because they 're subject to credit requirements of the mortgage wholesalers.

Bradley said the mix of mortgages sold to wholesalers compared with those that are serviced locally varies by bank and depends partly on how aggressive the bank is in building its business.

Credit standards were tightened recently by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Association (Freddie Mac), both of which purchase and guarantee mortgages for banks.

Another source of non-deposit revenue for banks is the Federal Reserve, which has tried to combat the credit crunch with auctions since December. A recent auction, for example, offered $30 billion at an interest rate of 3.08 percent. The Fed announced on March 10 that it will make another $200 billion available by swapping U.S. Treasury bonds for mortgage-backed securities.

The housing market slowdown, declining home values and mounting foreclosures have been less severe in Wisconsin than in some other states, but the state hasn 't been immune.

Wisconsin, for example, ranked 10th in the nation in the percentage of loans in foreclosure in the latest National Delinquency Survey by the Mortgage Bankers Association.