Although there are many reasons and explanations for exactly why the current housing market turmoil resulted, much of the focus is on the countries large lenders. There is also enough blame to go around, including buyers purchasing homes they could not afford, and existing home owners refinancing to remove all built up equity out of their homes. The nation’s mortgage lenders facilitated both.

By the term "lender", we do not mean the local mortgage broker or bank loan officer. Lender refers to the large national companies which fund the vast majority of home mortgages.

Subprime loans given to borrowers with weak credit, purchasing expensive homes with no down payment – this was the common theme during the recent boom in housing prices. The ready availability of loans created an ever higher demand and drove prices of real estate in many areas, including the Tampa Bay market, to unsupportable levels. Economists and housing experts were not surprised when the "bubble" finally burst.

The ever increasing availability of loans created competition among the lending institutions which forced loan criteria to be relaxed, and allowed their customers to overextend on mortgage payments they could not afford. Our televisions and mail boxes were full of offers for refinancing our homes to take cash out for anything from remodeling to buying the boat or RV of our dreams.

When home prices peaked, and then began to fall, a large number of homeowners found themselves with little or no equity in their homes. With home prices continuing to fall, many now find that their home values are below the balance due on their mortgages. Because many home owners purchased at the height of the market, and put little or no money as a down payment, they have no motivation to remain in their home. With the perception of nothing to lose, many are simply walking away from homes and allowing them to be foreclosed on. Unlike our parents in generations past, who saved for years in order to pay 20% as a down payment, these owners do not feel the same reluctance to walk away from an investment they struggled to obtain.

The recent glut of foreclosures has hurt the average home prices further. As banks sell of foreclosed on properties at lower prices, they artificially have driven values of surrounding properties down – resulting in even more home owners owing more than their home is worth. And the typical seller is unable to compete with banks selling homes, pricing their foreclosed properties below what a typical home owner can afford to list their home for.

Once the national lenders began to recognize the crisis that they contributed to, how did they react? Recently, the large wholesale lenders began to publish lists of "Declining Markets" and new lending guidelines. Now, most of the national lenders have followed suit with similar policies.

Lenders have now tightened lending guidelines across the board. Where once almost any credit score qualified for a loan of some sort, now only the highest credit scores qualify for the most desirable types of mortgages. Typical borrowers for a conventional mortgage loan must now have excellent credit scores, and show a large amount of equity or down payment to qualify. Lenders have also established lists of Declining Markets, including the Tampa Bay Area. For loans in these declining markets, the loan requirements and the scrutiny placed on loans from these areas is even higher.

As a result of these new lending guidelines, customers find it much harder to find loans. The same borrowers who were encouraged to refinance to remove cash, now can’t qualify to refinance to get out of a bad loan and avoid foreclosure. Home owners who are trying to sell their homes are likewise finding it harder, as the low numbers of current buyers find it harder to find financing.

In short, the pendulum of lending practices has swung from one extreme to the other. From loans for almost all to loans for almost none.

There are bright spots. New guidelines for FHA loans have created a safe haven for many borrowers. Current market conditions are primed for a recovery, and many experts agree that the bottom of the market has been reached. Home owners and those in real estate or building related industries are just waiting to see when the return to a stable market will be seen.