The thunderous echoes of Lehman Brothers' bankruptcy and Bank of America's takeover of brokerage giant Merrill Lynch might seem very far away from Main Street Southwest Florida, but they are likely to have a profound impact in a region still struggling with credit and housing.

Borrowers are having difficulty getting loans for the very same reason that Lehman was forced into bankruptcy on Monday: a tight market for capital, in the wake of one in which the spigots were wide open.

Standard terms in these days of tight lending standards already require many borrowers -- particularly those looking to finance investment properties -- to put 30 percent down rather than the 20 percent standard before the credit crisis began weighing in during August 2007, mortgage experts said Monday.

That scenario is likely to be further complicated as lenders react to the fact that credit problems again pushed Wall Street titans into trouble.

"This will make it even harder for commercial firms and individuals to borrow money, and it may result in demands for immediate debt repayment," bank analyst Richard Bove of Ladenburg Thalmann & Co. warned on Monday. "This will harm the economy for an extended period."

In a once-hot real estate market where the availability of loans will be critical to dealing with the enormous overhang of housing inventory, any further tightening is sure to slow a recovery.

"You're seeing a bad real estate market, and it's not going to turn any time soon," said Jack Fisher, chief executive officer at Wood Asset Management Inc. in Sarasota. "This will probably delay that turn even further. People will become reluctant to make any purchases."

Like most credit crises, the issue becomes one of perception versus reality. People believe things are terrible and getting worse even as the economy continues to show positive signs, Fisher said.

Others think the recent gyrations at the highest level of finance -- spurred by investment banks' ill-conceived plays in subprime mortgage instruments -- are just a necessary and painful return to a more balanced marketplace.

"It is going to mean reduced credit, absolutely," said Jack McCabe, a Deerfield Beach-based consultant to real estate developers and investors. "Much stricter qualifications for what credit there is. It is going to mean a tightening of the economy -- a necessary one. We need to get back to basics here because things got so far out of whack."

To Sentinel Mortgage President Frank Fontanetta, the credit crunch is a matter of degrees, not of absolutes. As a real estate investor, you can still walk into Sentinel and come out with a loan for a house or even an apartment building, "if you have good credit and can document your income," Fontanetta said. But that is where the 30 percent down payment comes in.

"Thirty percent is going to get the job done," he said. "You'd pay three points, whereas for owner-occupied you wouldn't pay any."

Even though the credit crisis has been largely an epic of tightening, there have been signs of relief, particularly after the federal government's takeover of mortgage giants Freddie Mac and Fannie Mae. In just the nine days since the Treasury Department's move, mortgage rates have tumbled, Fontanetta noted.

"We are down to 5.5 percent on a 30-year fixed-rate loan," he said. "We haven't been that low in well over two years."

Lynchpin brokerage

Meanwhile, the thing on the minds of many of this region's retirees on Monday was likely how the two sides of the deal -- and thus customers -- would be affected by the takeover by Bank of America of Merrill Lynch, the world's largest and most widely recognized brokerage.

Merrill's brokerage offices remain open for business -- same name, same brokers as before, despite the monumental, government-facilitated takeover. The company has offices in Sarasota, Bradenton, Venice and Punta Gorda that employ 108 financial advisers.

The takeover sent a jolt through the community, said Charlie Murphy, president and CEO of the Bank of Commerce in Sarasota.

"All those people who have been clients at Merrill for so long are asking, 'Is my money OK?'" Murphy said.

"Those brokers were on the phone all morning telling them that nothing is going to change, and they are now partners with the biggest bank in the country."

Banking consultant Tramm Hudson said an immediate local impact will be on the large number of people who are stockholders in the two companies. Bank of America is still digesting its takeover of Countrywide Financial, the nation's largest mortgage provider.

"What does this do long term for their stock holdings? They hope that the acquisition of two big companies, Merrill Lynch and Countrywide, will not threaten their dividends," Hudson said.

Bank of America, Florida's second-largest bank with an estimated $65.7 billion in deposits, has 46 offices with $4.1 billion in deposits in Sarasota, Manatee and Charlotte counties.

Longtime Sarasota banker Jody Hudgins likes their combination.

"Even though Bank of America will be an incredible competitive behemoth, this will do more to reassure the market that things are manageable and that this, too, shall hopefully pass," said Hudgins, who heads Florida operations for First National Bank of Pennsylvania.

The deal speaks to the strength of Bank of America, he said.

"BofA has taken their hits and bruises, but they have not had their nose bloodied," Hudgins said. "Their policies and ways of doing things have been proven in a very difficult market that has been stressing far beyond anything we have ever seen."

Government regulators are less concerned about Bank of America gaining too much financial power than holding off a rash of bank failures, Hudgins said.

"Right now, the lesser of our concerns is the concentration of financial consolidation," he said. "This will make banks smarter and better and adapt their risk management policies."

Merrill, meanwhile, averted pressure it may have felt after Lehman's bankruptcy, said Bove, the Ladenburg Thalmann & Co. analyst.

"If these were normal times, this deal would be viewed as a huge success for both companies," Bove said. "This may not be the case in the next few days as the markets sort out the implication of the Lehman bankruptcy filing, but longer-term, the deal will be recognized for the success that it is."

Bank problems

The deal is a harbinger of many more consolidations to come, said McCabe, the Deerfield Beach consultant.

"We are going to see a tremendous amount of consolidation in the banking industry because the little ones and the mid-sized ones will not be able to compete with the larger ones," he said. "It is like Wal-Mart and Target growing while mom-and-pop stores become uncompetitive."

On the micro-scale, Fontanetta of Sentinel Mortgage can already cite an example: He acquired a small mortgage company in Osprey -- "a little two-man shop, and the guy threw his hands up and said, 'I can't deal with this anymore.'" The two loan brokers will simply become Sentinel loan originators, and Fontanetta gets to take over their customer base for repeat business possibilities.

"He was just too small," Fontanetta said. "He couldn't survive. It is all about volume and relationships."

Mike Shedlock still thinks there is another shoe to drop in the nation's economic travails: the commercial loan portfolios that local banks tend to keep on their books.

Shedlock -- an investment advisor for Sitka Pacific Capital Management, but better known as the blogger who created "Global Economic Analysis" -- has been uncannily accurate about the credit crunch.

As the nation's economic malaise grows, Shedlock foresees tenants who stop paying rent on shopping center storefronts, eventually resulting in owners failing to make payments to local or regional lenders.

While small and mid-sized banks passed along most of the residential mortgages that they wrote, they kept their commercial loans, Shedlock notes.

"I like to say that the shopping center economic model is dead," Shedlock said. "They bet on rising lease rates and rising occupancy rates. Instead, you've got rising vacancies and falling lease rates."

He expects hundreds of bank failures accompanied by consolidations of many survivors.

"Housing started blowing up in the summer of '05," Shedlock said. "The credit markets are just a year into this."

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