I was having dinner with a friend of mine the other night, gorging on all-you-can-eat sushi, when we started talking about real estate. My friend, who is planning on buying her first home this summer, told me she started reading more about the housing crisis so she could get a better understanding of today's market. Despite her studious efforts, she tells me, she 'still doesn't get it.'

Like many people who aren't agents or mortgage brokers, trying to understand the causes of the housing meltdown is like trying to read Mandarin. While the housing problems are a lot more complex than I can even understand sometimes, after talking with various industry experts and reading up on new reports from National Public Radio, The Wall Street Journal, The New York Times, CNNmoney.com, and Bloomberg News, the explanation below is a simplified answer to my friend's query.

Wall Streets jumps in
Back in the 'good old days,' banks use to meticulously review a borrower's financial portfolio because they wanted to make sure they got their money paid back to them. But times have changed, and over the past decade, Wall Street has created a cash cow from mortgage backed securities by repackaging the loans and selling them off to investors from all over the world.

As a result, selling loans quickly turned into a commission game to lenders. During the housing boom, some brokers felt that getting the $20,000 commission was more important than denying less-qualified borrowers a loan. Once the loan was sold, it had become someone else's problem. But investors didn't question these high risks, because home values were going up and everyone was making money. That was until all those unqualified borrowers, who shouldn't have been approved for the loans to begin with, started defaulting on their payments. Due to the rapid growth of mortgage companies over the last decade, industry standards have been limited and inconsistent.

Industry standards
The housing problems stemmed not just from zero-down loans, but because these loans were given to people with terrible credit and insufficient income to sustain their monthly payments. A good handful of lenders, underwriters and investors turned a blind eye during the housing free-for-all. Accountability usually results form oversight, and without one the other cannot exist. Now nobody really wants to take the blame for the one of the worst housing crashes in U.S. history.

Visiting various housing industry blogs, I'm surprised to still see mortgage brokers pushing loans with low-down-payments and high interest rates. I'm told by one broker that there's still three private lenders offering zero-down payment loans. But the heyday of under-regulated lenders may be over. Both Republicans and Democrats agree that that their needs to be greater regulations within the industry, and better controls in the systems. Over the next year we're going to start seeing proposals for tougher rules both from the government and financial leaders. But as the old adage goes, 'hindsight is 20/20.'

Got hot local housing tips or a story you want to share? Contact Amy Le at openingdoorsblog@HomeFinder.com.