WATERLOO - Metro banks remain relatively untouched by the latest shake-up in the struggling U.S. housing industry.

In early July, housing finance giants Fannie Mae and Freddie Mac announced they were in major trouble. With housing prices down and foreclosures up, their shares plummeted, and losses are expected to continue.

Congress has endorsed a housing rescue aimed at sparing an estimated 400,000 homeowners from foreclosure and extending a lifeline to Fannie Mae and Freddie Mac.

Despite reservations, President George W. Bush signed the bill Wednesday. It is regarded as the most significant housing legislation in decades.

Most banks in the Cedar Valley have steered clear of risky subprime lending, but further loan restrictions reflect the global economic uneasiness.

"The days of 100 percent financing that was somewhat prevalent a year or so ago is not negligibly available in the marketplace now," said Dave Deaver, president of 1st National Bank in Cedar Falls. "It's a different credit underwriting that's occurring now, but I would say probably more normal as you look back."

Lenders are reverting to stricter credit policies and regulations, Deaver said. Larger down payments or stronger debt-to-income ratios are better strategies to protect against a delay in cash flow - caused by a job loss or unexpected medical expenses - or fluctuations in the housing market and pricing, Deaver said.

"What we're seeing right now is people that buy and sell loans on the secondary market are really looking hard at the borrowers' creditworthiness. They're looking hard at the appraisals, making sure that the properties are desirable, all those kinds of things," said John Rathjen, market president with Liberty Bank.

However, officials at Veridian Credit Union haven't tightened lending criteria on loan portfolios. A loan that uses the lender's money and is not sold on the secondary market. Underwriting decisions and payments are handled in house, instead of through an investor.

"When a member does experience a financial hardship, and we certainly have had plenty of that with the floods that have occurred, we're giving them loan extensions and working with them, so it's a win-win for both the member and the credit union," said Doug Gilbertson, senior vice president of operations at Veridian.

Federally regulated banks maintain prudent lending practices and aren't to blame for hasty negotiations, said Stacey Bentley, Cedar Valley market president for Community National Bank. Some financial institutions have forced purchases through the system without verifying a borrower's credit history or income.

"We have strong underwriting and due diligence and capital standards," Bentley said. "Most of the foreclosures and problems that you're seeing today are the result of the risky loans that were made by loosely regulated players - non-bank companies - in the mortgage market," Bentley said.

Area banks have seen few foreclosures and delinquent payments compared with some other parts of the country. Wells Fargo's foreclosure rate has been lower than the industry average, said Jason Menke, communications consultant with Wells Fargo Home & Consumer Finance Group.

But problems caused by the subprime loan crisis can affect local lenders indirectly, Gilbertson said.

"When their rate adjusts, it impacts their ability to repay other debts that they may have with us," Gilbertson said. "The good news is our delinquency and charge-off (or defaulted debt) numbers are less than they were last year."

Black Hawk County foreclosures - both residential and commercial - climbed from 24 in June 2007 to 31 in June 2008, according to figures provided by Black Hawk County Abstract and Title. From 2003 to 2007 the county averaged 22.2 foreclosures in the month of June.

Counseling on the front end has kept many borrowers from dipping into a negative situation, 1st National's Deaver said. The local market is holding its own, he added.

"We've kept a pretty steady demand for local housing. We're still seeing job creation in the area, and of course, jobs are what pay for mortgages and bring people to your community," Deaver said.

"Thus, as we enter this time frame when we're seeing the credit markets be reduced or contract, that can affect pricing, but the price reductions have been minimal," he added.

Loan applications are ahead of projections for 2008, not only for real estate loans but for all loans, said Gilbertson of Veridian.

Those trapped in unaffordable loans can discuss refinancing options at area banks.

"Also, it may not hurt for them to get a second evaluation from another lender that could give them something to compare against," Rathjen said.

Contact Tina Hinz at (319) 291-1484 or tina.hinz@wcfcourier.com.