WASHINGTON (Reuters) – A recently created FBI team is setting priorities on mortgage fraud investigations, and the bureau is using undercover operations, wiretaps and computer technology to get evidence of economic crimes, the agency's chief said on Wednesday.

FBI Director Robert Mueller told a House Judiciary Committee hearing that the agency in December created the National Mortgage Fraud Team at headquarters to assist field offices in their pending investigations.

In his prepared remarks submitted to the committee and in his actual comments, Mueller said the team also is helping to identify the worst mortgage fraud perpetrators and to evaluate where additional FBI employees are needed.

The FBI's mortgage fraud caseload has tripled in the past three years to more than 2,400 cases, Mueller said.

In addition, the FBI has more than 560 open corporate fraud investigations, including matters directly related to the current financial crisis, he said. The FBI has declined to identify any companies under criminal investigation.

Mueller said the FBI has found new ways to detect and combat mortgage fraud.

One example involved a national FBI initiative that uses statistical correlations and advanced computer technology to search for companies and individuals with patterns of property flipping, he said.

"In addition, sophisticated investigative techniques, such as undercover operations and wiretaps, not only result in the collection of valuable evidence, they provide an opportunity to apprehend criminals in the commission of their crimes, thus reducing loss to individuals and financial institutions," he said.

Mueller said he met last week with Mary Schapiro, the head of the U.S. Securities and Exchange Commission, so that the two agencies could better coordinate investigations.

The two agencies have been investigating allegations of financial statement manipulation, accounting fraud and insider trading that contributed to the current economic crisis.

ATLANTA – Federal Reserve Chairman Ben Bernanke said Tuesday there's been "tentative signs" that the recession may be easing. But he also warned that any hope for a lasting recovery hinges on the government's success in stabilizing shaky financial markets and getting credit to flow more freely again.

Specifically, the Fed chief mentioned improvements in recent data on home and auto sales, home building and consumer spending as flickering signs of encouragement.

"Recently we have seen tentative signs that the sharp decline in economic activity may be slowing," Bernanke said during a speech at Morehouse College in Atlanta.

"A leveling out of economic activity is the first step toward recovery. To be sure, we will not have a sustainable recovery without a stabilization of our financial system and credit markets," he said.

But the Fed is "making progress on that front as well," Bernanke said, and will keep working to ease financial and credit stresses so those markets operate normally.

In a question-and-answer session after the speech, Bernanke acknowledged that the job market for graduates is the most difficult in decades. But he said the country still needs smart and hardworking people, especially in the business community, and urged students not to make financial compensation the main factor in what profession they choose.

"People ought to go into a profession based on what they enjoy, what is valuable to them, what they think is valuable to their society," Bernanke said.

Referring to the current economic crisis, Bernanke said "it is clear that some of the compensation and some of the risk-taking was excessive" in the financial community. There will be a more vigilant regulatory environment going forward, he added.

Bernanke also addressed the inequities in wealth between whites and minorities.

"Part of it has to do I think with financial education," Bernanke told students at the historically black college. "There needs to be broader understanding in minority communities ... about the importance of saving and building a credit record."

Bernanke said many factors contribute to the issue — including access to home ownership, income levels and differences in professions — but promoting financial literacy in minority communities is important.

To revive the economy, the Fed has cut a key bank lending rate to a record low of near zero and has rolled out a number of radical programs to spur lending to Americans, a key ingredient to turning around the economy.

On that front, the Fed recently plowed $1.2 trillion into the economy in an attempt to reduce interest rates for mortgages and other loans. The Fed, meanwhile, also is considering expanding a program to jump-start consumer lending, Bernanke said.

Many analysts believe the economy will continue to shrink in the April-June quarter but not nearly as much as it had been — perhaps at a rate of 2 to 2.5 percent.

The economy shrank at a 6.3 percent rate in the final three months of 2008, the worst showing in a quarter-century. Some economists say it fared about as poorly in the first three months of this year, while others expect a 4 to 5 percent rate of decline. The government releases its initial estimate for first-quarter economic activity at the end of April.

President Barack Obama is counting on the $787 billion stimulus of tax cuts and increased government spending to help bolster economic activity. The administration also has put forward plans to prop up troubled banks and to reduce home foreclosures.

The government is battling a three-headed monster: housing, credit and financial crises, which are the worst since the 1930s.

"The current crisis has been one of the most difficult financial and economic episodes in modern history," Bernanke said.

Even as the Fed chief mentioned improvements in some recent economic data, a government report released Tuesday showed the economy remains in a fragile state. Retail sales dipped 1.1 percent in March, a much weaker showing than analysts expected.

All the Fed's aggressive actions to fight the crisis also will help fend off any risk of a widespread and prolonged decline in prices, known as deflation. Bernanke didn't use the "d" word, but said that because of the weakness in economic conditions in the U.S. and worldwide, inflation has been low and will "remain quite low for some time."

Wholesale prices fell 1.2 percent in March as the cost of gasoline, other energy products and food plunged, the government reported Tuesday. Excluding volatile food and energy prices, the Producer Price Index was unchanged, below analysts' forecasts of a 0.1 percent rise.

Because the Fed's policies can help thwart a destabilizing drop in prices, they are "not at all inconsistent" with the central bank's goal of achieving stable prices over time, Bernanke said.

Some critics worry that the Fed's policies could spur inflation over the long run if key interest rates aren't quickly boosted and special lending programs aren't rapidly dismantled once the economy shows strong signs of turning around.

Bernanke acknowledged this will be a challenge and require a delicate balancing act. But he was optimistic the Fed is "well equipped to make those judgments appropriately."

Meanwhile, the government's bailout of giant insurer American International Group Inc., to the tune of more than $180 billion, underscores the urgent need for stronger regulations and new powers to minimize the damage from the collapse of a huge nonbank financial company, the Fed chief said.

"In my view, preventing the failure of AIG was the best of the very bad options available, but it nevertheless involved major costs, including financial risks to the taxpayer," Bernanke said.

The Federal Housing Administration used to be known as a place for low-income borrowers with tarnished credit histories. But now, it has become a destination for borrowers whose credentials are respectable, but not stellar.

To qualify for the best interest rates on a new or refinanced mortgage, you need to have a top-notch credit score and a substantial down payment or home equity. But if you have less than perfect credit and less than 20 percent in home equity, an important threshold, you’ll have to pay a lot more. And that’s why many of those borrowers are turning to the F.H.A.

The F.H.A. requires down payments of only 3.5 percent and has less stringent credit requirements than conventional mortgages backed by Fannie Mae and Freddie Mac, the two government-controlled mortgage finance companies. F.H.A. mortgages also have become one of the least expensive alternatives for new mortgages and refinancing, given the increase in fees tacked onto traditional loans.

“Just about anyone that is putting down less than 20 percent needs to consider F.H.A. financing,” said Joe Rogers, executive vice president of Wells Fargo Home Mortgage. “That doesn’t mean they need to take it, but they should consider it.”

The F.H.A., which was created during the Great Depression, does not make loans, but insures mortgages that meet its guidelines. Because the F.H.A. is the only viable option for a lot of people, its loans now account for a much larger percentage of all mortgages. In 2005 and 2006, at the height of the housing boom, only 1.8 percent of all mortgages were F.H.A.-backed, according to Inside Mortgage Finance. Last year, that number ballooned to 17.1 percent. The F.H.A. now insures 4.8 million single-family mortgages worth about $550 billion.

Historically, F.H.A. loans carried a certain stigma. They were viewed as hard-to-obtain loans for low-income consumers with checkered credit histories and small down payments. They also tended to be more expensive.

But in the current market, the opposite is often true. Qualifying for a regular mortgage has become more expensive, sometimes prohibitively so, given the many fees that are now layered onto conventional loans backed by Fannie Mae and Freddie Mac.

The fees are generally levied on borrowers deemed to be more risky. The charges depend on your credit score and the amount of money you’re borrowing relative to the value of your home. But they tend to hit people with credit scores under 700 and less than 20 percent in home equity. Carrying a home equity loan may result in extra fees, as will taking cash out of your home when you refinance.

The extra charges aren’t the only hurdle consumers may face. Borrowers with less than 20 percent in home equity must also purchase private mortgage insurance. The insurance has become much more difficult to qualify for and more expensive, especially in areas where home values have declined the most.

F.H.A. borrowers won’t avoid mortgage insurance, but they will escape the extra fees, lenders and mortgage brokers said. And that’s why, for many families, the F.H.A. program has become the most economical option.

If you’re having trouble securing a mortgage or refinancing an existing loan, here’s what you need to know about the F.H.A’s program:

ELIGIBILITY - Borrowers need to prove that they have sufficient income to meet their monthly mortgage payments.

Generally speaking, your payments, including taxes and insurance, should not exceed 31 percent of gross income. When you include car payments, student loans and other obligations, your total debt shouldn’t exceed more than 43 percent of gross income. But these thresholds are only guidelines. So if you have a larger than required down payment, or a good amount of money in the bank, you may be able to bend these rules.

The F.H.A. doesn’t impose any income limits or credit score minimums, but people with credit scores below 500 must have at least 10 percent of equity in their home to be eligible. (The average F.H.A. borrower has a score of 640.)

But to keep default rates down, many F.H.A.-approved lenders have recently started to impose their own credit score minimums — above and beyond the F.H.A’s. guidelines — and are requiring more stringent income documentation. Clearly, they’re trying to protect themselves: if a particular lender’s default rates exceed neighboring lenders, they can be audited and even removed from the program.

“In the last month and a half, there has been a dramatic increase in the minimum credit score required,” said Michael Moskowitz, president of Equity Now, a New York mortgage lender that makes F.H.A. loans. “Some went to 580 and others went to 620.”

COSTS Whether an F.H.A. loan will cost less depends on your personal situation. Currently, however, borrowers with credit scores less than 700 with less than 20 percent in home equity often come out ahead with F.H.A. loans. At the very least, lenders and brokers say it pays to compare the costs of an F.H.A.-insured loan versus a conventional mortgage if you fit into this category.

Generally, an F.H.A. loan’s total costs — including the interest rate and mortgage insurance — become less than a traditional mortgage’s costs as your credit score and home equity declines.

All borrowers must pay an upfront mortgage premium of 1.5 to 1.75 percent of the loan, which is usually tacked onto the loan amount. You must also pay an annual mortgage insurance premium of 0.50 of the loan amount (if you are borrowing 95 percent or less of your home’s value) or 0.55 percent (if your loan is more than that).

That premium is broken down into monthly payments. The monthly mortgage premium can be canceled once the mortgage amount falls to less than 78 percent of the home’s value, but it must be paid for at least five years — and it can only be eliminated by paying down your mortgage (not through appreciation in the value of your home).

Excluding the insurance premium, closing costs are about the same amount as you would pay with a traditional mortgage. All homes must be appraised — which costs about $400, on average — unless you’re refinancing an existing F.H.A. loan, said John Councilman, president of AMC Mortgage in Fallston, Md., and chairman of the National Association of Mortgage Brokers’ F.H.A. committee.

LOAN LIMITS - In many areas, loan amounts appear to hew closely to the conforming loan limits set by Fannie Mae and Freddie Mac. But F.H.A. limits are much lower in less expensive areas: in the lowest-cost areas, the F.H.A. will insure loans up to $271,050, though that number can rise to $729,750 in the costliest parts of, say, New York or California.

TYPES OF LOANS - The F.H.A. never trafficked in the exotic sub-prime loans that started the financial crisis. The vast majority of borrowers get a 30-year fixed-rate mortgage, though it also offers 15-year fixed rates and adjustable-rate mortgages.

FINDING A LENDER - Lenders need to be approved by the F.H.A. to participate in the program. You can find lenders or free counseling services through the Department of Housing and Urban Development’s Web site. You can search for mortgage brokers through the Upfront Mortgage Brokers Association, a trade group whose members state their fees in advance (though you’ll have to peruse the list for brokers that work with F.H.A. lenders).

ADDED BENEFITS - All F.H.A. loans can be assumed by a new borrower — as long as they qualify — which allows more flexibility if you plan on selling the home later. If mortgage rates were to rise, the new borrower is entitled to the existing interest rate.

Meanwhile, your down payment can be a gift from a family member. And co-borrowers don’t necessarily need to occupy the home. Moreover, the F.H.A. is more reluctant to foreclose on its borrowers. It has said that borrowers in default get to keep their homes about 65 percent of the time.

“They do not foreclose as quickly or without a thorough vetting of the situation,” Mr. Councilman said. “That’s very important in today’s market.”

Tax season is upon us, and homeowners everywhere will reap the benefits of tax breaks and incentives. If you're currently renting, consider the tax advantages of homeownership. Now may be the time to buy. If you're an owner or seller, new incentives will help you survive this tough housing market. Know what expenses you can deduct and understand how new laws affect you. Remember to consult your tax advisor.

1. Deduct the interest you pay on your home loan on your tax return. That means the mortgage interest deduction reduces your tax liability. And because your mortgage payments for the first few years are almost entirely comprised of interest, they are almost entirely tax deductible.
   
   
2. Deduct property taxes and points you paid to lower your loan's interest rate. The IRS offsets the expense of your state/local property taxes by allowing you to deduct them from your itemized income tax return. And you get a tax benefit if you paid points to lower your mortgage interest rate.
   
   
3. Take advantage of new laws in a challenging market. New homebuyers can get an $8,000 tax credit, short sellers won't be penalized for forgiven mortgage debt, and homeowners can contest their property taxes in a declining market.
   
   
4. Request a property tax reassessment if your home's market value has declined. You don't need to pay for a special service to have your local tax assessor adjust your property taxes. If your property value is significantly lower now than when you bought it, show proof of your home's current market value and recent comparable sales in your neighborhood.
   
   
5. Research past and proposed assessments that may apply to your home. Understanding property taxes and assessments will give you a truer picture of the cost of homeownership and help you predict and control your monthly expenses.
   
   
6. Get a reliable estimate of your property tax bill. If you're buying a home, don't rely on the tax data in the property listing. Depending on the circumstances of the sale, your tax bill can differ from the previous owner's bill.
   
   
7. Wrap your property taxes into your monthly mortgage payment. If paying one huge tax bill once or twice a year seems daunting, consider getting an escrow account. Also called an impound account, it protects the lender and offers convenience for the homeowner.
   
   
8. Understand how capital gains tax is calculated. When you sell your home, you're taxed on any profit over $250,000 if you are single, $500,000 if married. But calculating your gains isn't as simple as "price you sold it for" minus "price you paid for it." The IRS takes into account the money you put into improving the home as well. So remember to save receipts for any repairs, maintenance and upgrades.
   
   
9. Know how your tax situation changes with every real estate move you make. Whether you're buying a home, refinancing or renting out an investment property, understand how you'll be affected tax-wise.
   
   
10. See if homeownership lowers your tax liability. Your tax situation varies depending on your stage in life. Examine your payroll withholdings and reduce them to account for the reduction in net tax liability. That means more money in your pocket every pay period.

The cities that are showing signs of stabilization and those that continue to unravel.

Wishing you'd left the game earlier is a time-honored Las Vegas tradition. Today, that's true not only for gamblers but for homeowners there. The last time Las Vegas properties were worth more than the average mortgage? August 2003.

Blame overbuilding and risky loans, a gambling mentality or even the desert sun, but based on Thursday's results from the S&P/Case-Shiller home price index, which measures metro home prices in 20 cities through December 2008, Las Vegas is the weakest market in the country. Prices are dropping quickly (down 4.81% since last month and 33% in the last year), the pace of decline is accelerating at the third-fastest rate in the nation, and based on lost equity, homeowners are out 65 months of mortgage payments.

All signals that things aren't likely getting better any time soon.

"Vegas is a market unto its own," says Steve Cesinger, chief financial officer at Dewberry Capital, an Atlanta-based real estate investment firm. "I don't know what those guys were drinking when they thought all this building made sense. If it does work out soon, then there's some force out there in the universe that I'm not aware of."

The S&P/Case-Shiller home price index, released monthly, examines repeat home sales in 20 metro markets, including the city core and surrounding suburbs. This means that while prices in tony San Francisco neighborhood Pacific Heights might be holding up, the net effect of including a bankrupt suburb like Vallejo brings down the metro area's score. Each city's score is assigned based on the price difference from 2000, which is scored as 100. So San Francisco's score of 130.12 means prices are up 30.12% from 2000. It still has the potential for a further fall, given the 31% year-over-year drop.

Forbes also analyzed monthly declines and year-over-year declines in home prices to determine where prices were falling fastest and where those drops were picking up momentum. It's not a good thing for San Diego that prices from November 2008 to December 2008 fell 2.13%, but as prices declined by 2.29% from October to November, and 2.44% from September to October, the speed with which prices are falling is slowing.

That slowing rate of decline, also seen in places such as Denver, Washington, D.C., and Boston, helped rank those cities as some of the stronger markets in the country.

Contrast that with Minneapolis, where prices fell just 0.96% from September to October, but by December, the rate of month-to-month declines had jumped to 4.6%, an unwelcome acceleration.

Next, to rule out places in complete depression, we looked at how many months of equity homeowners have lost. Places like Detroit (-2.98%) and Cleveland (-2.07%) haven't declined as quickly over the last month as Seattle (-3.63%) or Charlotte (-2.55%), but that's because prices in those two Rust Belt cities are so depressed it's difficult for them to fall any further. Detroit and Cleveland homeowners have lost 141 and 92 months of equity, respectively, whereas Seattle and Charlotte prices have only declined for the last 39 and 33 months, respectively.

One other factor to consider with the Case-Shiller numbers is that the index tracks repeat home sales. That means cities like Tampa and Miami, which are notorious for overbuilt new inventory and high numbers of foreclosures, perform better on the index than they ought to, as those two factors are not tracked.

"Case-Shiller doesn't take into account new construction or foreclosure sales," says Jonathan Miller, president of Miller Samuel, a Manhattan residential appraisal firm. "In some of these markets, I'm not sure how you can ignore new construction or foreclosures."

Another city with foreclosure and new construction problems is Phoenix, where bad loans have mounted and mortgage delinquencies, a forebearer of foreclosures, have risen.

"It's pretty gruesome," says Anthony Sanders, a finance professor at Arizona State University. He points to delinquencies as a major problem and a sign that the Valley of the Sun won't be bouncing back any time soon. In Phoenix, seriously delinquent loans--those that haven't been paid in 90 days--have increased from 3.5% to 27.3% for subprime loans since this time in 2005. Adjustable-rate mortgages that are seriously delinquent have gone from less than 1% to 20.2% in the same period.

With those problems looming on the horizon in many cities across the country, Obama might need more ammunition than his proposed $75 billion foreclosure prevention package offers.

Then again, even in a boom-bust capital like Los Angeles, if you bought in 2000, paid your mortgage on time and are still in your home, you've seen a 71.5% price appreciation. There's something to be said for that kind of responsible, long-term investor.

WASHINGTON — Senate Democrats on Monday advanced the $838 billion economic stimulus bill, clearing a major procedural hurdle by a razor thin margin with the help of just three Republicans. A vote on final passage of the bill is expected on Tuesday.

The Senate vote, by 61 to 36, to close debate on the stimulus, symbolized the partisanship that still grips Congress despite President Obama’s call for new cooperation. It also highlighted the rising power of the centrist Republicans who cast the critical votes. Under Senate rules, it takes 60 votes to invoke cloture and usher a bill to a vote.

Those votes, by Senators Susan Collins and Olympia J. Snowe of Maine and Arlen Specter of Pennsylvania, along with the 56 Democrats and two Independents who regularly vote with them, followed a succession of floor speeches by Republicans criticizing the stimulus as a bloated, wasteful spending bill.

But supporters of the measure said that a good, bipartisan effort had been made at drafting a compromise bill.

“I am proud of the bipartisan work that we have done during the last 10 days,” said Ms. Collins, who supplied one of the three crucial Republican votes. “As with any major legislation, this bill is not perfect, but it can go a long way toward creating jobs and addressing the dire economic crisis facing our nation.”

The majority leader, Senator Harry Reid of Nevada, said: “The United States senators from both parties met the seriousness of the economic crisis with an earnest approach to solving this emergency.”

With Mr. Obama in Indiana Monday afternoon to kick off a heightened effort to sell the stimulus plan to the public, Senate Democrats responded with their own speeches describing the bill as desperately needed to create millions of jobs and halt the recession. But for all the recriminations, it was unclear if Congress, in reconciling the Senate and House version of the bill this week, would take steps to ensure that it provides the quickest, most effective lift for the economy, or if lawmakers would simply take the path of least political resistance in rushing to get the bill to the White House by Monday.

Senate Republicans leveled their grievances amid an outcry by some House Democrats and governors and mayors from around the country, who accused Senate Democrats of caving to Republican demands by reducing the aid to states in the bill.

If the Senate approves the measure, as expected, negotiations to resolve differences with the $820 billion bill passed by the House are expected to focus in part on the Senate’s decision to cut $40 billion from a state stabilization fund.

That money, while not providing a direct lift to the economy, would reduce pressure on states for layoffs and service cuts that economists say would undercut the efforts by the stimulus bill to create jobs and spur consumer spending and business investments.

As it stands now, the Senate bill focuses more on tax cuts, while the House bill provides more aid to state and local governments. The Senate bill does not include $19 billion for school construction included in the House bill, reduces health insurance subsidies for the unemployed, and scales back Mr. Obama’s proposed middle class tax cut.

The Senate bill also includes nearly $70 billion to prevent millions of middle class families in 2009 from having to pay the alternative minimum tax, originally designed to impose minimum tax payments by the wealthy. Because Congress has made such an adjustment for years now, economists say the provision offers no new help to the economy.

Just as the Senate was voting, the Congressional Budget Office released a new analysis showing the total cost of the Senate version of the stimulus bill to be $838.2 billion over 10 years, of which $292.5 billion or roughly 35 percent is in the form of tax cuts.

The cost of the bill fluctuated slightly throughout the weekend, as Senate Democrats finalized the legislative language to reflect their deal late Friday night with the three Republicans.

After a week of the most open floor debate since Democrats won control of the Senate in 2006, the Republicans complained that they had still been largely shut out of developing the huge package of spending programs and tax cuts to revive the economy.

Senator Charles E. Grassley, Republican of Iowa, for instance, said that he and other Republicans had been prevented from offering amendments, including one that would place restrictions on an increased in federal aid to states for rising Medicaid costs.

“I’m not convinced the majority wanted to have open debate and take votes on many of these amendments including mine,” he said. “It’s too bad because this bill still can be made a bipartisan bill and this bill can still be made a more effective states.”

Senator James Inhofe, Republican of Oklahoma, complained that for all the spending in the bill, it does not provide a sufficient number of public works projects. ,

“If we’re going to spend all this money, let’s at least get something for it, provide some jobs and get some roads and highways and bridges, things this country really needs,” he said.

“This is the largest spending in the history of mankind, the largest spending in the history of the world,” Mr. Inhofe added. “It’s something that we should not let happen, but it is going to happen right down party line.”

The Republican leader, Senator Mitch McConnell of Kentucky, said he appreciated the more open floor debate but that it had not led to a bill that he could support. “Just because we get amendments doesn’t necessarily mean we will win them,” he said at a news conference.

“This package, had it been developed in genuine consultation, could have had a different result,” Mr. McConnell said. “But at the end of the day, it was — the administration decided — let the package be developed in Congress by the majority, and old habits die hard. You know, there was no meaningful consultation in the early part of the process. So if you don’t have that on the takeoff, you don’t end up having it on the landing.”

By VIVIAN S. TOY

MORTGAGE rates have dipped to their lowest levels in decades, but getting a mortgage in New York City these days often has less to do with buyers’ finances and more to do with circumstances beyond their control.

Your Money Guides

Michelle V. Agins/The New York Times

‘TORTUROUS’ Norman Calvo, the president of Universal Mortgage, says banks are now requiring documentation from buildings as well as home buyers.

Mortgages: Banks Bypassing Mortgage Brokers (February 1, 2009)

Even if a prospective buyer has impeccable credit and reliable income, many banks are refusing to make loans if they don’t like what they find when they review the finances and bylaws of the building where the purchaser hopes to live.

Among the matters under scrutiny: the dollar amount and type of insurance a building has; the size of the building; the size of the apartment; and, in the case of new developments, the number of apartments sold and closed.

Mortgage brokers, real estate lawyers and agents say that the roadblocks some banks have thrown up seem almost arbitrary. “Banks are asking questions that I’ve never heard anybody ask before,” said Roberta Axelrod, the director of residential sales and rentals at Time Equities, a real estate developer and landlord. “They’re looking in much more detail into specific aspects of the buildings.”

Mortgage brokers say that bank requirements seem to change week to week and vary greatly from bank to bank. Many of the banks are responding to directives from Fannie Mae and Freddie Mac, two government-sponsored agencies that resell packages of loans to investors. Most of the requirements have been on the agencies’ books for years, but the credit crisis has prompted them to adhere to them much more rigorously than in the years when the real estate market was booming.

“It’s gotten torturous,” said Norman Calvo, the president of Universal Mortgage, a broker with offices in Manhattan and Brooklyn. “It’s still possible to get a mortgage, but the documentation required now is monumental because the questionnaires and insurance documents needed have to come not just from the purchaser but from the building, too.”

Mr. Calvo said he recently spent hours on the phone on behalf of a prospective buyer in an eight-unit building in Brooklyn, pleading with a major bank to ease off on its demand that the building be insured for a replacement cost of up to $2 million in the event of a boiler explosion.

“The whole building was only worth $796,000 and the boiler only cost $5,000 to replace, so the insurance company told us it was impossible to get that kind of replacement coverage,” he said. “But the bank wouldn’t budge.”

Smaller regional banks tend to be more forgiving because they are more familiar with the local market, mortgage brokers said, but they often cannot provide deals as attractive as those offered by larger national lending institutions.

While mortgage brokers can help buyers wade through the guidelines, buyers may be better off in some cases going directly to banks. Many large banks, including JPMorgan Chase, Wells Fargo, Citigroup and Bank of America, are for the most part no longer offering loans through mortgage brokers, preferring to have borrowers work directly with their own loan officers.

Banks of all sizes are now carefully reviewing the insurance policies that co-ops and condominiums hold, specifically to see whether a building has fidelity bonding, which is insurance against theft by property managers or by the building’s board of directors; whether its insurance has an A rating; and, if a building is in a flood zone, whether it has adequate protection.

The standards set by banks often put smaller buildings at a disadvantage. Many of them, for example, do not have fidelity bonding or may have insurance rated A-minus or even lower. (The ratings refer to an insurer’s ability to meet its obligations to policyholders.)

Avi Fisher, who recently sold his co-op in downtown Brooklyn, said he went through a few weeks of nail-biting uncertainty when his buyers informed him that their bank would not close on their mortgage because the 20-unit building had insurance rated only A-minus. “I talked to our property manager and he said this was going to cause a wave of problems all over New York because most buildings have A-minus insurance,” he said.

The buyers went searching for a bank that would make the loan despite the insurance rating and eventually found one, Mr. Fisher said. “I think they wound up going to the bank that owns the underlying mortgage on the building itself, so it worked out,” he said.

In neighborhoods like Battery Park City, which is in a flood zone, banks are now demanding very high levels of flood insurance.

Luigi Rosabianca, the principal of Rosabianca & Associates, a real estate law firm that does much of its business in Battery Park City, said that as a result, many buyers are finding that they have to add flood insurance to their homeowners’ insurance even if they’re buying an apartment on a high floor.

“The banks are concerned about buildings’ not having enough insurance for full replacement if there is a flood,” he said. “In the past, you always hada difficult bank now and then, but you didn’t have all the banks being difficult.”

Depending on how much coverage a bank requires, the additional insurance might cost a one-bedroom buyer about $2,000 to $2,500 more a year, according to Mr. Rosabianca.

Buyers in smaller buildings are also finding it very difficult to get loans or to refinance their mortgages. “If you have a co-op of less than five units, nobody wants to touch it,” said Mr. Calvo, whose Brooklyn office works with many brownstones of four units or fewer. He said some banks would agree to refinance a mortgage if they already held the mortgage.

For new loans, he said, his office has to do much more research to make a deal happen. Because most banks will agree to do only one loan in such a small building, his loan officers have to get mortgage information from every other homeowner in the building and then find a lender that has no loans there but is willing to work with a small building.

Banks unfamiliar with the New York City market often set guidelines that don’t apply. Ms. Axelrod of Time Equities said she had seen banks reject loan applications because they didn’t want to give mortgages to people in walk-ups, to apartments under 500 square feet or to buildings that don’t have parking.

“They think walk-ups are substandard housing, and they don’t realize that 500 square feet is actually a nice-sized studio in Manhattan,” she said. “And as far as parking — well, hello — we have to explain to them that most existing construction in the city doesn’t have parking and people are perfectly willing to buy in these buildings.”

In fact, many of the guidelines are designed to deal with problems that have arisen in the national marketplace, problems that the city has managed to avoid, said Melissa Cohn, the president of Manhattan Mortgage. “New York City is a big exception,” she said, “and the fact that we’re put under a national umbrella is certainly hurting our marketplace.”

For new construction, some banks will now make loans only if the building is at least 70 percent sold or 51 percent occupied. These standards make it very difficult for developments that are being sold before construction is finished. Ms. Cohn said some banks were willing to give waivers, but “a lot of the buildings that are still under construction are going to have trouble.”

Shaun Osher, the chief executive of Core Group Marketing, which represents many new developments, estimated that 90 percent of the dozens of projects that were being considered but not started have probably been shelved and that many of developments in mid-construction have also been put on hold.

“The developers can’t get construction loans because the buyers can’t get mortgages,” he said. “Everything is connected.”

As a result, many developers are looking for ways to self-finance by offering mortgages directly to prospective buyers.

Ms. Cohn held out some limited hope. “Everything changes on a day-to-day basis,” she said. “But I think it’s going to get worse before it gets better.”

WASHINGTON -- President Barack Obama conceded Friday that his administration and lawmakers disagree on some of the details of the $825 billion economic recovery package being crafted in Congress, but said the legislation is on track to be completed by next month's Presidents Day weekend.

"We are experiencing an unprecedented, perhaps, economic crisis that has to be dealt with and dealt with rapidly," Mr. Obama said in brief remarks to reporters before a meeting with Congressional leaders from both parties. "Frankly, the news has not been good. Each day brings, I think, greater focus on the problems we're having, not only in terms of job loss but also in terms of some of the instabilities in the financial system."

Senate Minority Leader Mitch McConnell (R., Ky.) agreed that lawmakers should be able to get the stimulus legislation to Mr. Obama by mid-February, but told reporters that Congress will have to show "a good deal of restraint" to keep the bill "timely, temporary and targeted."

Friday's meeting at the White House comes amid mounting partisan division over the recovery package's components, with Republicans complaining that the plan is overloaded with unnecessary spending that will do little to break the economy out of its slump. Mr. Obama has pushed for bipartisan support of the package, but early indications suggest it could pass Congress with slim Republican support.

"I know that it is a heavy lift to do something as substantial as we're doing right now," Mr. Obama said. "I recognize that there are still some differences around the table and between the administration and the members of Congress about particular details on the plan."

GOP leaders presented their plans to Mr. Obama on Friday, though, saying that the situation is moving too rapidly to wait for next week.

Obama Says Stimulus Plan on Target

President Barack Obama, meeting with Congressional leaders at the White House, says an aggressive stimulus plan is on target for passage by mid-February. Video courtesy of Reuters.

The GOP plan, put together by House Republican Whip Eric Cantor of Virginia, includes proposals to reduce the lowest individual tax rates, allow small businesses to take a tax deduction equal to 20% of their income, and give home-buyers who can make a minimum down payment of 5% a credit of $7,500. House Republicans also said the bill should include a provision precluding any tax increases to pay for new spending.

"I'm concerned about the size of the package and I'm concerned about some of the spending that's in there. How do you spend hundreds of millions of dollars on contraceptives, how does that stimulate the economy?" House Republican Leader John Boehner of Ohio told reporters after the White House meeting.

The White House took issue with complaints that spending included in the legislation that passed the House Appropriations Committee on a party-line vote late Wednesday wouldn't stimulate the economy. Office of Management and Budget Director Peter Orszag told Senate Budget Committee Chairman Kent Conrad (D., N.D.) in a letter that 75% of the package would be spent over the next 18 months.

"There's no question that the president believes that the bill is stimulative," said White House spokesman Robert Gibbs. "Absolutely, it's stimulative."

According to a senior Republican congressional aide familiar with Friday's meeting, the president made it clear that the House bill is one that he supports. Republicans voiced their concerns generally about the level of spending in the stimulus plan, and in particular a provision that would in effect give a tax refund to lower-income Americans who don't currently pay any income taxes, the aide said. The president said he was committed to the refund remaining in the package.

The aide said Mr. Obama indicated he might be willing to consider including more financial assistance targeted at small-business owners than is currently included in the plan, and urged the Republican leaders to work with Lawrence Summers, who heads the National Economic Council.

Obama makes remarks on the economy during a bi-partisan meeting with members of Congress.

Mr. Obama will travel to Capitol Hill early next week to meet both Republican caucuses. Mr. Gibbs declined to predict how much GOP support the legislation would garner, or say whether the White House would be disappointed if few Republicans back the bill.

"The legislative process, as we all know, is a long and winding road," Mr. Gibbs said.

In addition to the stimulus package, the White House is hammering out its plan for the Treasury Department's rescue of the financial sector, which could exceed the $350 billion released by Congress last week. The administration has said it will devote $50 billion to $100 billion to addressing foreclosures. It is also considering ways to purchase banks' bad assets.

Mr. Obama also took aim at companies that receive government assistance from the Treasury, saying that accountability and transparency will be critical in his administration's approach to the financial crisis.

"Some of the reports that we've seen, over the last couple of days, about companies that have received taxpayer assistance, then going out and renovating bathrooms or offices or in other ways not managing those dollars appropriately, the lack of accountability and transparency in how we are managing some of these programs to stabilize the financial system, and a recent [Government Accountability Office] report that speaks to some of the problems of waste in our government -- those all have to be part and parcel of a reform package, if we're going to be responsible in dealing with this economic crisis," the president said.

Mr. Obama began receiving daily briefings on the state of the economy this week, a reflection of the recession's prominence in his agenda. He also plans to sit down with Treasury Secretary-designate Timothy Geithner on Friday, and hold another session on the economy at the White House on Saturday.