Financing increasingly available

To consumers, it may seem that getting a loan these days is a difficult process, but banks say that they've got money available - be it for a new car, a house or a small business.

"Banks, because of the recent past, are being more prudent, more conscious of capital ratios. At the same time, almost everyone's credit is diminished in some fashion," said Robert Burney, a finance professor at Coastal Carolina University.

The result is that borrowers and lenders have somewhat different views of the same situation, he said.

Mike Owens, CEO of Coastal Carolina National Bank, said that the bank has money that it is willing to lend.

"I think the challenge has remained that coming out of this recessionary environment is that businesses and consumers are not as confident as they normally are and therefore they do not have expansion plans," he said.

Tom Maeser, a real estate analyst with the Coastal Carolinas Association of Realtors, said that the lack of financing, especially on oceanfront property, is contributing to the foreclosure problem and delaying the recovery of the real estate market.

Burney said the situation of banks having money to lend but not putting it all to use is disappointing and frustrating to everyone involved.

The continually weak economic recovery that is grinding on is further damaging consumers' credit and business owners' earnings, which are the key factors in loan decisions. Changes in bank regulations have tightened up credit and that, combined with weak capital situations or regulatory orders, has made banks shy away from any type of risky loan, he said.

"Banks are being more cautious than they were, regulations are tighter, the economy is weak, everyone's credit profile is weaker and all together that puts a damper on the whole process," Burney said.

Real estate-related loans seem to be the most challenging, but buyers are not having too many problems qualifying for car loans, he said. The United States Small Business Administration has reported an uptick in small business loans in the past six months, which may be a positive sign that lending in that sector is returning, Burney said.

Real estate loans

Bankers and buyers have differing views on the availability of mortgages today - the lenders say they have money to give, but buyers report challenges in getting loans, especially on oceanfront and investment property.

The requirements for mortgages haven't changed much in the past few months, and, if anything, it is now easier to qualify, said Mark Branstrom, a regional vice president at Bank of America Home Loans. Bank of America was requiring 10 percent down payments, but with a good credit score, about 680, it is now making conventional 30-year mortgage loans for 5 percent down.

Federal Housing Administration Loans, which require 3.5 percent down, are increasingly popular. Veterans Affairs and United States Department of Agriculture Rural Housing Loans also offer loans with low down payments and lower credit score requirements, he said.

One of the main challenges today is getting appraisals that are equal to or more than the amount the buyer is willing to pay and the loan amount, Branstrom said.

Branstrom said that more stringent regulations have affected some policies but that, as long as borrowers meet the criteria, the bank will not shy away from lending.

"We're more cautious to dot our 'i's, to make sure it's documented well," he said. "That's why it takes longer to process them."

Maeser said that most Realtors report that permanent residents are able to get a loan to purchase a new home, but that loans for investors and oceanfront properties are hard to come by.

"It's overregulated, especially for our high investment marketplace here," Maeser said.

About two-thirds of all Grand Strand properties are second homes or owned by investors and that segment of the market is essential to its health, he said. Fannie Mae and Freddie Mac won't back loans for condo-hotels, or condotels, which are prevalent, and also won't lend when more than 15 percent of homeowners in a complex are in default

The high proportion of buyers paying cash, a rate that has hovered at about 50 percent for more than a year, is an indicator of the lack of available loans, Maeser said.

"We've been extremely fortunate to have 50 percent cash purchasers. Just think how good the market would be if we had financing for those people," he said.

Branstrom said Bank of America isn't doing any lending on condo-hotel properties, in large part because there is no secondary market for those loans. Bank of America is doing some portfolio loans, which means they keep them on their books rather than selling them, but many of those are jumbo loans on more expensive properties, he said.

The bank has started making those jumbo loans because it believes that there will soon be a secondary market where it can sell them.

"You just don't know on the condotels if there is going to be a market for that," he said.

Most of Coastal Carolina National Bank's lending has been for its own portfolio as the two-year-old bank tries to grow. The bank wants to make loans because it is the only way it will expand, President and CEO Mike Owens said.

Coastal Carolina National Bank has been making some oceanfront condo loans on a limited basis, but the money allocated for those loans is almost gone, Owens said.

Those loans are kept on the bank's books and not sold on the secondary market, he said.

"Some banks have pulled out of that market so there became less money available for that type of lending so we therefore believed it developed an opportunity for us," Owens said.

The program requires stable buyers with at least a 30 year down payment and requires an ability to pay the mortgage without rental income, he said.

Car loans

Car buyers may have the easiest time getting a loan, because manufacturers and banks are eager to lend, but are still looking closely at the borrower's ability to pay, according to some local car dealerships.

"They're all trying to go out there and jump start the market," said Patrick Sparks, the general manager of Sparks Toyota, adding that banks are offering as many loans as they were before the financial crisis.

To make the bank loans sweeter, many car manufacturers are running interest rate incentives or rebates to draw sales and traffic to their dealerships, he said.

To some potential buyers, it may seem that it is harder to get a car loan today, but that is largely because the financial crisis has damaged many consumers' credit scores, Sparks said. While the qualifying guidelines haven't changed much, fewer people have the credit scores to qualify, he said.

For buyers with the highest credit scores, there is money available but banks are not giving as many loans to less-qualified borrowers as they used to, he said.

"Banks changed parameters and said we will buy top cream of the crop but won't take the chance on lower tier borrowers," he said.

Nicky Creech, the finance manager and commercial sales manager at Bell & Bell Buick GMC Trucks, said that banks are looking at each situation on a case by case basis and many are willing to give loans at good rates.

"In the past couple months, in comparison to two years ago, the availability of getting auto loans and auto leases is a lot greater," he said.

Banks, especially Ally Financial, which they regularly work with, are aggressively seeking buyers looking for a loan, Creech said.

There are several qualifying factors: employment, income, spending and loyalty with the bank, he said. Every decision is made on an individual basis and there aren't strict credit score requirements, he said.

"They're understanding that some people have marks on their credit right now. They're looking at the whole person not just the score anymore," Creech said.

Business loans

The number of small business loans is picking up, especially those backed by the federal Small Business Administration, and banks are increasingly willing to lend to qualified borrowers, officials said.

The demand for small business loans has increased this year and banks have been more willing to meet the need, said Elliott Cooper, the district director of the South Carolina district office of the Small Business Administration.

"South Carolina loan volume has ticked up. We're seeing lenders becoming a little more active," he said. "We are fast approaching where we were before the recession started."

Despite the improvements, the number of loans still isn't as high as the agency would like and it wants to see continued growth, Cooper said.

Some lenders were hesitant for some time to make business loans, and some still have preferences for the type of loans or businesses that they will lend to, he said.

Since October, 290 SBA-backed loans, totaling about $160 million, have been made in South Carolina. Historically, about one third of those have been made to the six coastal counties.

Dixon Woodward, coastal market president for TD Bank, which is one of the top SBA loan originators in the state, said that the bank has seen a variety of different loan requests come in - from franchise restaurants to medical offices to family entertainment centers.

"Demand has certainly increased of late," he said. "For a while demand was slow and there was a prevailing sentiment in the market that there wasn't available money to be borrowed."

TD has stepped up its efforts to educate small businesses about the available money, and the slowly improving business environment has spurred some to take loans to expand, Woodward said.

TD Bank hasn't changed the credit requirements but does carefully scrutinize each loan, he said. The loans are made on a case by case basis, locally, taking into account individual markets, Woodward said.

Burney said that an increase in business lending could be a good sign for the economy, but most recent indicators point to a slow recovery.

"The choppy stream of economic statistics probably means that we're still going to suffer through this lukewarm economic state for a while," he said.