Less Money Available for Home Loans, Mortgage Official Says

America’s bankers are running out of money to lend home buyers and homes could become less affordable as a result, the president of the nation’s largest single source of home mortgage money said today.

Mark J. Riedy, president of the Federal National Mortgage Assn., said lenders must raise more money or ask for bigger down payments from home buyers “many of whom--especially first-timers--may not be in a position to meet those demands.”

If builders or lenders can’t find money, borrowers may have to find their own, perhaps asking their parents to help with a big down payment, he said.

His remarks, released in Washington, were prepared for the Mortgage Bankers Assn.’s secondary mortgage conference in Los Angeles.

High inflation is no longer able to “bail everybody out,” he said.

“We all thought inflation was terrible, but it sure helped out the housing industry for a long time,” he said in a telephone interview. If a big monthly payment left a buyer temporarily short of cash, the next jump in inflation was likely to give the borrower a raise and increase the value of the house.

Now, in certain depressed areas of the country, the borrower may be out of work and the home worth less than the loan balance.

Riedy warned that builders, appraisers and lenders must be more careful when they make their financial decisions. With home prices and wages going up at a slower pace, those in the housing industry can’t depend on inflation to smooth over any errors they make in evaluating a home’s value or a buyer’s ability to pay, he said.

He said FNMA is conducting studies “to see if appraisals are part of the problem of bad debts” and to determine whether appraisers need to change their guidelines for determining a home’s value.