As the housing market continues to stall, and in other bad news, more and more mortgages begin to default, we begin to see changes in the infrastructure of how things operate.

Subprime loans; those mortgages given to people with not so stellar credit have become very popular lately, and are also one of the main reasons for the high foreclosure rates we are seeing across the nation.

This is also a result of lenders becoming even more lazed in their standards and offering these loans to people who have no means of paying them back.

Now that many industry officials are realizing this, we will probably see that it will become harder for people with bad credit to get into a loan than ever before.

So the people with bad credit who have defaulted or become delinquent may have potentially made things a lot harder for future borrowers with bad credit.

A February 4, 2007 article by Dave Collins of The Associated Press, and posted on CBSNews.com, “Shifting housing market snubs bad credit,” discusses how those with bad credit could have trouble taking out a mortgage in the near future because of changes within the industry.
“Homeowners with troubled credit histories are finding it harder to get mortgages or refinance homes because softening in the housing market is making lenders less likely to handle riskier loans.”

“Several lenders of subprime mortgages _ used primarily for home equity loans and for people with spotty credit _ have shown signs of trouble after the housing bubble popped and more homeowners began defaulting high-interest mortgages.”

The tightened standards are already becoming more apparent across the nation.

Although the credit score has always been an important part of getting a loan, now that the industry as a whole is toughening up, the score will step out of the shadows once again and borrowers will realize they must have a favorable one to get approved for a loan.

Credit scores generally range anywhere from about 400-850, and the higher your score the better interest rate you will receive on your loan; resulting in lower payments.
“Most lenders consider scores above 700 to be a sign of good financial health and scores below 600 to be risky and a reason to increase the interest rate on a loan, according to Fair Isaac Corp., which invented the FICO credit risk score.”

Although no one knows how the downturn of the subprime market will affect the housing market and nation as a whole, most think it will undoubtedly have a negative effect on all aspects of the economy.
“The subprime market is suffering through the first downturn in the housing market since the industry exploded a decade ago, said Karl E. Case, an economics professor at Wellesley College in Massachusetts. The housing slump and stricter loan requirements may put a dent in the nation's economy, with consumers having less money to spend because of higher interest rates and fewer refinancing options, Case said.”

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