Congress has been playing politics with the mortgage crisis, and so far at least, nothing at all has been done to alleviate the stress on middle class homeowners since the jumbo ceiling was raised a few months ago. One problem with this whole mess is that there are many causes and there will not be any one solution that will solve it. What do I mean by that? Assume that the current crisis was brought on by an increase in mortgage defaults, particularly by “subprime” borrowers. One way of looking at the issue is that too many people borrowed more money than they could afford to repay, and they got inflated appraisals to support those loans, and they exaggerated their income to convince lenders to give them more money. Further, most of these loans were on adjustable rate mortgages, and now that the adjustments are being made, they can’t pay.

On the other hand, what were the lenders doing over the last few years? Lenders were competing vigorously for exactly those borrowers, and then they were packaging those loans together and selling them to Wall Street. At the top of the food chain, investors were looking for a return on their money higher than they could get in traditional markets, and so they were willing to believe that no matter how much those interest rates were adjusted, the borrowers would continue to pay. Like the borrowers, they did not stop to think about what they could really afford to lose.

Over the next few months, we will look at the underlying causes from both the borrowers’ and the lenders’ standpoint. Many words have already been written about the subprime mortgage crisis, but as I talk to people, I find that few of those words have illuminated the topic for the average reader. Most people I talk to about this issue want to understand the causes and implications for their own finances, and for the impact the mortgage crisis is having on our country’s economy. We’re not entirely sure that we can do better, but we are going to try! Keep visiting, and let us know how we’re doing.