The volatility of subprime lending may be due in part to some of the fraudulent or questionable practice this industry engaged in to generate greater profits through more loans.

A number of factors played into the dramatic downward turns of the housing market, including predatory lending practices (see "The Subprime Fallout: Lending Practices" and "Targeting Women"), a massive increase in the use of subprime loans to finance home purchases, and inflated home values. In addition, many buyers during the boom have been losing their homes to foreclosure.

With the recent subprime industry fallout and exposure of some of the lending industry's questionable practices, new requirements are finally being enacted to regulate lender operations, ensure consumer protection and stabilize the housing market. Although they are still in development, these new regulations have been proposed at the commercial and federal level. 

In addition to some of the unethical activities in the subprime market (see "The Subprime Fallout: Lending Practices"), some consumer group have also found discriminatory practices with regard to types of loans that are given to would-be home buyers.

More recently, news reports have demonstrated the fallout of the subprime mortgage industry, as well as how it affects or is affected by the real estate market. For instance, major lender Countrywide has experienced a rollercoaster of lows and greater lows---starting with declining profits and increased foreclosure holdings, declining investor support which has lead to depositor withdrawals from Countrywide Bank in early August 2007, and finally a near-bailout by Bank of America.

Since homeowners move or purchase a new home within 5 to 7 years on average, you may be considering your long-term homeownership options. If you did not originally buy your home as an investment with dreams of immediate resale (or “flipping”), and you paid enough of the mortgage principle and have lived in your home long enough to build equity, what is your next move?

You’ve achieved your first home purchase, and were smart in selecting a home that meets your needs, and have mortgage terms that you don’t have to worry about being able to afford (see “The Two Sides of Homeownership” for more information). After the “new home smell” has worn off, keep in mind that it’s all yours--since you’re the landlord now, it’s up to you to manage and maintain your home.

In the recent real estate boom, the Federal Reserve found that younger consumers were able to purchase homes at a rate greater than any other period in real estate history. The abundance of predatory lending practices may account for this increase.

With recent changes to the mortgage loan industry and the increase foreclosure rate in many US markets, the availability of easy mortgage money may be limited. Either way, it is better to be smart about the debt you decide to risk your credit and finances over. Lenders will also make determinations on how much loan you can afford based on your income, as well as your current debts (e.g.: car loans, credit cards, etc.). Additionally, they will assess your ability to pay with how much of the “Two Cs”---cash and credit---you actually have (see “What You Need to buy a Home: The Two Cs” to see how these factors can assist or hinder your loan amount and interest rates).

If you work with an agent, he or she is legally obligated to work on your behalf to get the home you really need. At the same time, buying a home may be the largest purchase you make in your lifetime. You need to actively participate in all aspects of the home selection process regardless of your agent’s obligations to you.