The subprime lending business became a huge money making machine throughout the housing boom from about 2000-2005.

Subprime loans are loans that are given to people who do not normally qualify for prime mortgage rates; mostly consisting of those with bad credit or low income.

But now, the mortgage world is wondering what is going to happen to this industry now that the housing market is slowing. 

And more importantly, many people who took out these subprime loans have fallen behind dramatically.

A November 8, 2006 article by Jonathan Lanser of The Orange County Register, “Subprime loans on borrowed time,” looks at the problems that this industry is currently facing right now.

In Orange County especially, many mortgage businesses that have catered to subprime lenders are going out of business.

“Subprime lending was a true gravy train when real estate was hot and folks rushed to buy homes. Subprime deals all but created a new generation of homeowners. Today, though, nobody's getting rich making mortgages – traditional or subprime deals. Too many lenders are chasing an ever-shrinking pool of willing borrowers.”

“And in the dicey loan business, the slowdown across the county creates a flood of bad news that shows little hope of ebbing soon.”

The mortgage industry was grounds for making some very easy money just a few months ago, but times have definitely changed, most notable for those catering to subprime borrowers.

“Subprime lending got families with damaged credit into homes, while giving investors extra cash to play housing's upswing. If you haven't heard, the buying frenzy is over.”

“Let's take homeseller forecasts to heart and assume that folks will keep buying homes at a more ‘normal’ pace for the foreseeable future. Since the new normalcy will be much slower than the previous go-go days, no MBA is needed to guess that fewer people will need home loans to finish a deal.”

Some subprime lenders have even gotten into trouble recently, as regulators have accused some of dishonorable lending standards. This is after there has been an increase in the amount of foreclosures and delinquencies amongst people who took out a subprime loan. “Lending to folks with dubious credit histories is a tricky craft. People in financial hot water often lack borrowing experience and are vulnerable to the hard sell. And certain subprime lenders have been too aggressive in pushing their loans.”

“Just last week, Fed boss Ben Bernanke said in a speech that ‘although the emergence of risk-based pricing has increased access to credit for all households, it has also raised some concerns and questions, which are magnified in the case of lower-income borrowers.’”

The thing that economist and analysts are most worried about is the effect of all of this on the amount of jobs in this industry. We will just have to see what happens.