For many homeowners who are not watching real estate market trends on a daily or weekly basis, the barrage of articles regarding the increase of foreclosures doesn't seem to make any logical sense. What many of these homeowners were not aware of was the lending industry's trend in relaxing the traditional lending guidelines in the past few years which in part fueled the real estate boom. Now the situation has become a dire one for many home buyers who purchased homes in the past few years as lenders begin to tighten their guidelines and/ or their mortgages interest rates adjust.

According to a National Association of Realtor's online article, 'the Center for Responsible Lending (CRL) estimates that 2.2 million American households have lost or will lose their homes as monthly payments rise on high-risk mortgages in the next few years. Nontraditional and other new types of mortgages that opened doors to homeownership or refinancing just a few years ago might soon be showing some borrowers the door, as interest rates reset, payments adjust, and monthly payments become unaffordable for families at greatest risk.?

?In recent years, people with imperfect credit or minimal cash reserves who may have previously been unable to qualify for a mortgage were able to become home owners because lenders began offering new types of mortgage products in the subprime market. Subprime borrowers tend to have low FICO scores due to bankruptcies, poor credit histories and and/or legal judgments on their credit records. ?Many of these new mortgages kept initial payments down by offering a very low 'teaser rate,? interest-only period, or the option to pay varying amounts each month. When the initial period ends, the monthly payment increases, often by a significant amount.?

What most lenders knew, as they targeted this market, is that many of these clients were or are subprime borrowers and they are often the people least able to afford these large increases, given their limited cash flow and past credit problems.

According to the Mike Calhoun the president of the Center for Responsible Lending (CRL), he estimates 'that families will lose as much as $164 billion in home equity due to foreclosures in the subprime mortgage market?

While these losses will obviously be a savvy investor's gain, it may leave many homeowners in a worse financial situation then they found themselves initially as decent credit reports are needed to rent apartments or other types of housing. Much of the fallout of these indiscriminate lending practices still remains to be seen.

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