Some experts worry that the problems could affect the wider economy. Congress may act to control risky lending. And Senate Banking Committee Chairman Christopher Dodd says federal aid may be needed to protect buyers.

If a buyer misses too many payments, a lender may try to reclaim the house through a forced sale. Nationally, foreclosure rates increased in the fourth quarter, but especially among subprime loans.

A number of lenders have already failed or left the business. Yet some may be able to escape losses by passing their risk to others. Many lenders sell their mortgages to investment banks. The banks resell the loans, creating trillions of dollars in mortgage-backed securities. These are bought and sold on financial markets. But some of these investments can be very risky if homeowners cannot repay their loans.

Subprime loans are only part of the story, however. House prices have been slower to rise, and in some places have dropped. Housing expert James Diffley of Global Insights says prices for existing homes in California could drop 16% this year. He says other states including Arizona, Hawaii, Florida and Massachusetts could have large declines as well.