Is affordable credit drying up?

Terricita Sass is alarmed. The Norfolk State University administrator knows that about one in five of her students gets a loan that is not federally guaranteed and that this pool of money may shrink this summer.

Gary Pope is puzzled. The northeastern North Carolina resident figured a home refinancing would drive his monthly payments down by as much as $700. Instead, the bank turned down his application, telling him he did not meet its tighter lending standards.

And Barbara Wright is concerned. The credit counselor in Chesapeake has seen more people relying on credit cards for routine expenses, a trend that could undermine family finances and lead to more personal bankruptcies.

These three individuals recounting three different experiences reflect, in some ways, this region's credit landscape.

Most lenders' credit decisions are made at the national level, so it's difficult to discern credit availability locally. But interviews with more than a dozen players in the credit pipeline - borrowers, lenders and others - show that this area is feeling some of the crunch seen elsewhere.

"Lenders are open for business, but our banks are managing risk more aggressively and looking more closely at FICO scores," the widely used ratings of consumers' credit strength, said Joe Belew, president of the Consumer Bankers Association, a national group based in Arlington.

Nationally, cracks began to appear more than a year ago in the market for subprime home loans. The problem quickly spread to other types of less-traditional mortgage loans.

By mid-August, losses on some exotic mortgage-related securities nearly paralyzed the nation's credit markets, prompting the Federal Reserve, the nation's central bank, to begin slashing interest rates. As the problem worsened, the Fed made loans available to banks and brokerage firms, and last month it engineered a rescue of the failing New York investment bank Bear Stearns & Co.

Consider the situation of Wachovia Corp., which has the leading share of bank deposits in Hampton Roads. The Charlotte, N.C.-based banking company reported last week that it lost $393 million during the January-through-March quarter and would slash its dividend. Wachovia also said it plans to raise $7 billion of fresh capital by selling additional shares, which will dilute the stakes of its existing shareholders.

Because of these situations, lenders such as Wachovia have grown more cautious when offering home-equity lines of credit, auto loans, student loans, credit cards and other forms of debt.

The overall impact on consumers in Hampton Roads? It largely depends on the track record of the individuals. As Scott Hoyt, the director of consumer economics at Moody's Economy.com, an economic forecasting and consulting service, put it: The key determinant of credit availability for any region "is the credit quality of the borrowers."

Locally, the concentration of credit unions has helped cushion the crunch. These organizations are major providers of auto loans, and some make available first-mortgage loans and credit cards as well. They often have lower-cost credit and greater flexibility than other lenders. Navy Federal Credit Union alone has more than 245,000 members in the area.