Loose lending standards began to tighten and mortgage rates began to climb. It was becoming more difficult for borrowers without good credit to get mortgages. The fuel of credit that fanned the real estate flames since 2001 was starting to dry up.
» Lenders Begin To Grow Cautious, Cut Credit
» Housing Market Begins To Freeze, Housing Prices Fall

At the same time, many of those alternative mortgages designed to help borrowers afford the home of their dreams began to haunt them. Homeowners who expected to refinance their loans found it difficult or impossible to get a new mortgage. Those borrowers and many others suddenly faced significantly higher monthly payments. They were often shocked to learn of the increases, having never fully understood the terms of their adjustable rate loans. In some cases, borrowers didn’t read the fine print. In others, they misled lenders or falsified their income to get the mortgage. And, others simply put too much trust in their loan officer or mortgage broker.
» ARM Borrowers Turned Down For New Loans
» Credit Crunch Squeezes Life Out Of Real Estate Market

If they couldn’t make the new, larger payments, homeowners were faced with several, often difficult, choices. They could try to sell their property, perhaps at a loss, just to free themselves of the growing mortgage. They could stay and try to negotiate a compromise with their lender. Or, they could fail to make their payments, leading to defaults, foreclosures, and short sales.
» Borrowing Against Their Home, Owners Trap Themselves Into Bankruptcy

» Mortgage Banker’s Association
» Credit & Loans-Federal Trade Commission
» The Center For Public Integrity