Crash transformed lending

time, 10 years ago this week. Lehman and other financial institutions were big buyers of securities backed by some of these dicey mortgages.

Today, getting a mortgage is tougher and less risky. No-money down mortgages, which enabled borrowers to lower the costs of buying a home but often saddled borrowers with far higher balances or steep monthly payment increases, have vanished.

Banks also remain a bit shy after racking up billions in losses stemming from mortgages gone bad. That means homebuyers, especially those with less-than-stellar credit, face more hurdles qualifying for a mortgage than they did in the housing boom years. But the loans are safer, more transparent and take into account whether a borrower can afford to keep up with payments.

“The banks have loosened underwriting criteria for low-risk borrowers; they haven’t loosened underwriting criteria for low-credit score borrowers,” said Aaron Terrazas, senior economist at Zillow.

With Weishaar’s mortgage, the loan was scheduled to adjust to a higher rate after three years, but she was able to refinance it with another adjustable-rate mortgage. The next time it reset, however, was late 2007, as the housing downturn accelerated. Her husband had lost his job. The couple’s loan jumped from a 6.2 percent interest rate to 11 percent.

The easy financing, which had enabled the couple to buy their $346,800 house, backfired. “We bought probably about $120,000 more home than we should have,” Weishaar said.

After missing a few payments, the lender agreed to modify the loan. The interest rate dropped to 6.2 percent and the couple’s missed payments were tacked onto their unpaid principal.

The Weishaars rode out the years after the financial crisis and were able to refinance again in late 2014 into a 3.5 percent, 20-year fixed-rate loan.

Paul Sakuma The Associated Press A sign of a house under foreclosure in Antioch, Calif., in 2007. As home values plummeted after the housing bubble burst that year, many borrowers with exotic types of loans were stuck, unable to refinance.