As foreclosures reached a thirty-seven-year peak, the chickens were coming home to roost at lenders that had aggressively used these sales tactics. Many have had to file for bankruptcy. The reason? Subprime borrowers couldn't meet rising payment amounts as teaser rates began to drop off and interest rates began to rise.

Subprime lending refers to the credit status of borrowers. A subprime loan is made to borrowers who could not qualify for a more favorable rate because of low credit scores and histories of payment delinquencies, charge-offs, or bankruptcies. Because subprime borrowers are considered at higher risk of default, subprime loans typically cost more than more favorable loans.

You should keep a universal truth in mind. If a deal seems too good, or too tough to understand, it's probably something you should avoid.