Though City Borrowers Feel Pinch, Manhattan Seen as Insulated

When a young lawyer and his fiancée came into a mortgage broker's office looking for a way to finance the purchase of an uptown apartment, the broker, Richard Bouchner, said the deal looked like a "slam dunk."

The lawyer made more than $200,000 a year with his bonus and had good credit. He had little savings, but he fit the profile of a loan applicant that banks had been supporting, albeit with a higher interest rate.

Six weeks later, Mr. Bouchner isn't sure he can find the lawyer and a dozen or so other clients the financing they need, he said.

"Banks used to like these people," Mr. Bouchner, a co-owner of Commodore Mortgage, based in Jersey City, N.J., said. In the last few weeks, "there has been a real contagion effect," he said. "One lender after another is turning off the flow."

The lawyer's case is not yet part of a widespread trend, according to brokers, but analysts and others in the real estate industry said cases such as his could become more common in coming weeks, and possibly months, until the market corrects itself.

"We're in a new world," a professor of economics at New York University's Stern School of Business, Lawrence White, said. "My guess is that things will stabilize. Lending against real estate is a good business, but we're not going to be seeing the halcyon days of the past couple of years."

The consequences of young buyers with little savings or less-than-stellar credit having difficulty affording loans is uncertain and will be a subject of scrutiny over the next several months, analysts said.

Mr. Bouchner said new developments catering to young professionals could have more difficulty filling spaces, especially in neighborhoods such as the Lower East Side, Harlem, and Williamsburg.

New York City's wider real estate market will not be intensely affected by those buyers because people with strong financial backgrounds — not first-time buyers — are driving sales, the chief executive and owner of Manhattan Mortgage Company, Melissa Cohn, said.

Helping insulate Manhattan is also the fact that many of its buildings are co-ops, whose buyers have long had to meet standards well above those of mortgage companies and banks.

"People are still getting loans and they are still buying in New York City," Ms. Cohn said. "We're definitely more protected than most regions in the country." Still, she added that the tightening credit market is leading to more demands from banks and higher interest rates.

A real estate lawyer for Belkin, Burden, Wenig & Goldman, Aaron Shmulewitz, said buildings in other city boroughs would likely absorb the impact of the credit market woes. "There are more subprime borrowers out there," he said.

So far, the credit crunch is primarily hurting people with credit scores below 700, an owner of 14 Apollo Associates in Brooklyn, Basil Capetenakis, said. New York buyers typically have better credit.

He said the banks had been "going overboard" with risky loans to people with bad credit before the trouble started. Now, banks are scrutinizing his applicants more closely and shutting out certain riskier groups, such as people who are self-employed.