WACHOVIA Corp, the fourth-largest United States bank, will require minimum credit scores for mortgage borrowers and will reduce loan-to-value ratios because of the weak US housing market.

Beginning April 26, the bank will rate markets as either "stable," "watch" or "distressed" based on an index of home prices, the number of homes for sale and how quickly homes are being sold, David Pope, head of Wachovia Mortgage and Retail Credit, said in a memo to employees on Friday.

The bank will require borrowers in distressed markets to have higher minimum credit scores and to take on less debt in relation to the property's value, Pope said. Bloomberg News reported that the new policy applies to loans that Wachovia holds on its balance sheet rather than selling to the secondary mortgage market.

Wachovia spent US$24 billion in 2006 to acquire Golden West Financial Corp, an Oakland, California-based lender that had US$120 billion in so-called option adjustable-rate mortgages, with flexible payments that proved to be much riskier than fixed-rate loans. Almost 60 percent of Wachovia's home loans are in California, among the states hardest hit as housing prices slide.

"Everybody is pulling back like Wachovia and it's troubling because it's going to exacerbate the problem and slow the recovery," said David Lykken, a Texas-based industry consultant. "I know that every regulated finance institution is being visited by the regulators and decisions on mortgage lending are being heavily scrutinized right now."

The proportion of US borrowers at least 30 days late on their payments rose to 4.5 percent in March, according to data collected by Equifax Inc.

Mark Zandi, chief economist at the Moody's Economy.com unit, last week called the report "astonishingly bad."