By ANTON TROIANOVSKI and NICK TIMIRAOS

HOT SULPHUR SPRINGS, Colo.—Like many Americans, Jon and Laura Hagar are searching for a lender to refinance their home loan. But banks are leery of the Hagars. Their rural Colorado house is made of 17,000 old tires.

A niche mortgage mess is brewing in homes made of earth, tires, concrete and trash. Environmentally minded people built them, hoping to conserve energy and to re-use what might otherwise wind up in a landfill.

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Anton Troianovski/The Wall Street Journal

'This Odd House'

Such sentiments in some cases have been no match for the new resolve of the banking industry in the wake of the housing bust. Banks have become much pickier about examining sales of comparable homes, in deciding whether and how much to lend. Owners of odd homes can be out of luck.

The Hagars built their 2,700-square-foot house by stacking tire bales—five-foot-wide blocks of compressed tires—to form the exterior walls. They plugged gaps between the bales with cans, bottles, plastic plates, and other junk and moved in toward the end of 2008.

"We lovingly call it the trash house," Ms. Hagar says. The Hagars covered up all that trash with concrete, clay and stucco and installed south-facing windows to capture light, heat and views of the snowy slopes.

To pay for it, the Hagars in 2007 took out a $240,000 line of credit from Red Rocks Credit Union in suburban Denver. In the old days of easier credit, appraiser Lori Slota couldn't find another tire-bale home that had recently sold but said the house would be valued at $500,000 when complete, citing the listing of a straw-bale home as well as other houses in the area.

Last year, with the home finally finished and interest rates at record lows, the Hagars started trying to refinance into a long-term, fixed-rate mortgage. But in February 2009, they got the bad news from loan officer Bill Schimel, who wrote in an email, "I think we have really hit a brick wall here."

So far as anyone can tell, no home made from tire bales has sold recently in the state of Colorado. Lenders have been telling the Hagars they can't value the property and won't give them a regular mortgage.

Getting financing for unusual homes has never been easy. Near Granby, Colo., Richard Messer opted not to look for a conventional mortgage because there was nothing conventional about what's inside his walls: 50 tons of paper Coors beer packaging used as insulation. Mr. Messer got a $60,000 loan from friends to help pay for it. "The problem for anyone trying to do a unique house is financing," he says.

Wayne Bryant, a 56-year-old steamfitter, spent much of last year looking for a way to refinance a $417,000 construction loan on his underground house high in the San Juan Mountains in southwest Colorado. The first appraiser to examine his property didn't even come down from Denver to look at it, saying he had made a few phone calls and determined that there were no comparable transactions in the area, Mr. Bryant says.

"People like us that want to build these types of homes—we're basically at the mercy of the mortgage companies," Mr. Bryant says.

Brad Blackwell, Wells Fargo's national sales manager for Western markets, said lenders are scrutinizing home values much more closely than in years past before they make a loan—making it harder for people in unusual properties to get mortgages.

"It's simply a fact of the mortgage lending environment in general that determining value on a property is more important than ever today," Mr. Blackwell said.

Complicating matters, government-backed mortgage-finance giants Fannie Mae and Freddie Mac adopted a new code of conduct for appraisers last spring. In the past, mortgage brokers could call on appraisers who had developed a niche by tracking oddball homes.

The new code bars mortgage brokers and real-estate agents from any role in selecting appraisers. During the go-go years, appraisers frequently complained that they were being pressured by brokers to inflate estimates. The rules have a wide reach because Fannie and Freddie account for more than 70% of the mortgage market today.

Pagosa Springs, Colo. mortgage broker Connie Giffin is one casualty.

During the boom, she raked in as much as $295,000 a year just for arranging financing for what she calls earth-friendly homes.

She helped appraisers value unusual homes by guiding them to comparable properties in a database she kept. To finance a seven-bedroom dome-shaped house in Yuma, Ariz., Ms. Giffin pointed the appraiser to domes around the state.

Among the comps listed in the appraisal: a property 250 miles away with a dome-shaped observatory.

Under the new rules, Ms. Giffin is no longer allowed to work with appraisers for loans that may be bought by Fannie or Freddie.

Last year, her total was $16,000, and this year, Ms. Giffin says she is pretty much out of business. She has converted her office into an art gallery.

The Hagars are still hoping. Don Arkell, a vice president at Red Rocks, says he is looking for a way to refinance their loan and is still testing the secondary mortgage market. He worries that the house is so unusual that he won't be able to sell the loan to investors, meaning the credit union would have to keep the loan on its own books. With regulators concerned about the health of small banks, Red Rocks is focusing on making loans that can be easily sold should it need to raise cash.

"It is pretty bleak out there for people in properties that are hard to value," he says.

Write to Anton Troianovski at anton.troianovski@wsj.com and Nick Timiraos at nick.timiraos@wsj.com