Banks Tighten Credit Squeeze

Lenders are cutting credit, tightening standards or raising interest rates to a broader range of borrowers beyond those with weak credit records who qualify for subprime loans, the Wall Street Journal reports. Panic is spreading to a category of mortgages between subprime and prime that often involves borrowers who don't fully document income, or those buying for investment—about 13% of the market.

Lenders are "raising rates like crazy," said one mortgage broker, citing Wells Fargo's 8% charges for a type of prime 30-year fixed-rate loan that was under 7% last week. The squeeze "will further crimp effective demand for housing, and make late summer home sales season even worse than the dismal spring season," said an economist . (More Alt A loans stories.)