A few short months ago the biggest topic for the political candidates was the two wars that the United States is currently fighting. It was and still is a hot button topic but it has taken a back seat to a bigger issue ? our economy. The war in Afghanistan affected us all directly and had sentimental importance because of the terrorist problems in the world. The war in Iraq started out popular, but we all know where that is today. So it seemed like the war would be the main topic of this year's election. However with the mortgage ?meltdown? and the sputtering economy, things have definitely changed and the concern of most Americans is how is the election (and the next President) going to help lead us out of this economic downturn?

To understand the mortgage problems and how it will affect you is to start with a little history of the real estate market and the mortgage industry. The real estate market ,much like the stock market, is an up and down cycle, for lack of a better definition (most people have the misconception that the housing market continuously appreciates, since most have never seen a huge decline in value). It was high in the eighties (coming off a stagnant decade in the 1970's due to the Vietnam War, Watergate, and the oil embargo). The eighties was a time of prosperity and from that it produced higher real estate values. The early nineties showed a steep decline in prices and the cycle looked to be going into a downturn once again.

This up and down can actually be traced back to World War Two and the creation of the modern suburbs, but that is for a different history lesson. So the nineties were leading into a depression when the internet boom hit; and from this many opportunities were created. Besides a cash infusion into the economy, the internet also opened up the mortgage market. Instead of going to your local bank for a loan (which was previously the only way to buy a house) the internet created a huge market for mortgage industry. Because of an enormous amount of competition, loans increasingly became easier to obtain. Thus the lack of scrutiny needed to obtain a loan and of course this eventually leads to a huge mortgage problem. Please note there are many details omitted and I am merely trying to briefly summarize the history in order to explain how it affects you the consumer.

Now in today's market we are back into a huge downturn. Lenders are super conservative, secondary lenders (that you once found on the internet) are now gone, and standards for giving loans are outrageously tough. We are moving back into an era where load requirements are much more realistic- 20% down, good credit, steady paycheck... no more 0% down with unlimited funds available. So to make this short, that is how it affects you. Anytime you want to buy a house, get a line of credit or refinance your current loan, things will be tough to get done. Credit checks are now tougher, banks or lending institutions are now in defensive mode and the amount of money being lent is limited. Buying and selling a home will no longer be a climate of multiple offers with bidding wars. First time home buyers are goin to have a much tougher time getting into a new home. These things might not affect you directly today, but it will eventually come into your life.

It is a sad state of affairs, but it is typical and part of a larger cycle. Things do change, but unfortunately, it seems we are only at the beginning of an economic downturn. How the stock market bounces back and whether the banks will be able to rebound from the enormous amount of bad debt they were burdened with.