No panic on Main Street in mortgage crisis

By Michael Conlon

CHICAGO (Reuters) - There was no panic on Main Street but bankers and home buyers eyed ominous storm clouds on Friday as the mortgage companies that own or guarantee almost half of all U.S. home loans fought a funding crisis.

With the American dream of home ownership already in peril from the housing market's worst downturn turn since the Great Depression, the fresh turmoil at government-backed Fannie Mae and Freddie Mac injected new fears that borrowing for a home may become farther out of reach for many.

"My gut feeling is that it's going to make it more difficult" to get a loan down the line, said Jeff Wherry of Westlake, Ohio, executive director of the Ohio Mortgage Bankers Association.

"It will balance off somewhere but unfortunately more bad news makes everyone a little more gun-shy," he added, saying it may take another two months, four months or even a year for the fallout to land.

Shares of the two government-backed mortgage finance companies fell amid worries that they may run short of capital, faced with billions of dollars in losses from a spree of high-risk borrowing that fueled the housing market for years.

Mark Gorman, chief executive of Gorman & Gorman Home Loans in St. Louis, a mortgage banker, also sees tighter days ahead.

"There's been product elimination and the end consumer is paying more for, if it's a higher-risk loan they're paying more. That's going to continue," he said.

And if the two mortgage giants "continue to struggle and it doesn't get corrected, then it's going to affect the end consumer by having less product, less liquidity into the market, which is going to create more of a housing problem," he said.