Explain that the lenders that have been folding, were sub-prime lenders. When the market gets hot, everyone wants a piece of the action. Lenders pop up out of nowhere, the number of real estate agents increases, there are more FSBO"s because there is more business.
Since the end of 2001 interest rates were low, home sales were up and everyone jumped on the bandwagon. Since the bubble has burst in several large key markets and slowed in others everything has been making a correction. Agents are quitting, FSBO"s are down and much harder to sell, Sub-Prime lenders are folding.
People got loans without much qualification, and others who were well qualified got into bad loans (more than they could afford, or with a variable rate). Now the mortgage market is taking the correction for that, people and these lenders are in over their heads.
If you have good to above average credit, you can still get a loan. Banks make money by loaning it! The main thing here is to 1. Shop around, 2. Learn as much as you can about how loans work, 3. Stay with one of the large banks (Wachovia, Chase, Wells Fargo etc.) instead of some small independent lender.