As lenders shut down mortgage divisions and tighten underwriting guidelines, prospective home buyers are finding it more difficult to find a loan.

Wachovia closed its wholesale mortgage department Monday and announced Tuesday that it planned to reduce lending and securities, such as mortgage-based bonds, by $20 billion this year.

With the failure of subprime lenders about a year ago, borrowers going to local mortgage brokers are finding fewer options and even fewer loans they can qualify for as banks tighten lending requirements, mortgage brokers said.

"We're getting hit from all angles," said Yamila Ayad, president of Mission Home Loans in San Marcos. "Last August, when a lot of subprime lenders were closing, I was not shocked. But it becomes very concerning when your prime banks start closing."

Earlier, Washington Mutual and Bank of America shuttered their wholesale mortgage programs, by which mortgages are made available through mortgage brokers. Brokers then scan wholesale mortgages offered by various lenders and select the lowest rates for their clients.

All the banks continue to make loans available through their own salespeople, but options have diminished as mortgage brokers can offer less and hundreds of lenders that specialized in riskier clients have gone out of business completely.

"We're overrun with people who want to buy. The challenge is getting them qualified," said Matt Battiata, a real estate broker based in Carlsbad. "The effect on the market is as if the Fed jacked up interest rates."

In announcing the closing of its mortgage business, Wachovia said it took an $8.9 billion loss in the second quarter and would cut 10,750 positions. In the year-earlier period, the bank earned $2.34 billion.

Three rating agencies -- Moody's Investors Service, Standard & Poor's and Fitch Ratings -- downgraded their ratings on Wachovia's debt, citing increased expectations of losses in the bank's mortgage portfolio and its reduced flexibility to raise new capital.

Despite the difficult industry conditions, some new lenders are setting up shop.

Greg McBride, a senior financial analyst with Bankrate, said consumers can still find loans that fit their needs if they are fully qualified.

"Regardless, as a consumer you have to shop around," he said. "If you don't, you will not be able to uncover the most competitive terms and you won't educate yourself about what's available in the marketplace."

Still, mortgage brokers say more damaging than the disappearing products are tightened underwriting requirements. During the housing boom, mortgages were offered to virtually anyone, brokers said, but now banks are rejecting many well-qualified borrowers.

Tougher qualification requirements have also slowed the mortgage process. For example, government-chartered lender Fannie Mae developed an automated underwriting program. If a borrower's information meets certain requirements, Fannie Mae will guarantee the loan.

However, lenders are adding stipulations on top of Fannie Mae's guidelines, making it more difficult and time-intensive to secure a home loan, brokers said.

"I've had customers say, 'A year ago, this would have been done in a few days. Now, they're asking for everything including my shoe size,'" said Ginny Ferguson, a director for the National Association of Mortgage Brokers.

The Associated Press contributed to this report.

Contact staff writer Zach Fox at (760) 740-5412 or zfox@nctimes.com.