PORTLAND (AP) – A Maine-based lender has fallen victim to the credit crunch, and is on the verge of closing.

Downeast Mortgage is no longer writing loans and has closed all but one of its offices. While the company is not formally closed, the company’s shareholders will have to face that decision soon, said Darrell Briggs, the company’s vice president and one of four shareholders.

South Portland-based Downeast is caught in the same credit crunch that has forced some of America’s largest financial institutions to declare billions of dollars in losses. Briggs says Downeast’s problems center on the secondary market in which lenders sell bundles of mortgages to investors.

Downeast’s predicament arose during a recent meeting with officials of KeyBank, which for 15 years had provided the company a line of credit for mortgage loans, Brigg said.

“They never told us that they were going to stop doing business with us,” Briggs said. “They were looking for certain things that we weren’t willing to provide.”

To keep the line of credit available, Key wanted personal guarantees from the company’s principals. That was too much of a risk for the owners to take on, he said.

Downeast has been a leading lender to first-time home buyers under programs run by federal agencies and the Maine State Housing Authority, Briggs said. Those loans are considered particularly safe because federal agencies guarantee them or the housing authority buys the loans from lenders like Downeast.

Downeast hasn’t been a major lender in subprime loans, those made to borrowers with marginal credit, although it did write some of those loans, he said.

The Maine attorney general filed a complaint last fall over one of Downeast’s loans, alleging that officials of the company had steered a couple toward a commercial loan to get a mortgage for which they did not qualify. The loan now is in foreclosure.

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Information from: Portland Press Herald, https://www.pressherald.com

AP-ES-04-03-08 1333EDT