As real estate prices in cities like London have surged over the past few years, borrowers have used their homes as equity to upgrade to ever larger houses, as borrowers have done in the U.S. As adjustable rate mortgages reset after a period of fixed payments, the head of policy at the Council of Mortgage Lenders, said that some borrowers "could be facing big payment shocks soon, rises of perhaps 60 percent," and warned this could drive an increase in personal bankruptcies.

As various geographies are coping with similar issues regarding mortgage loan resets, it's interesting to see how different governments address the issues. The FSA's approach contrasts with the U.S., where Treasury Secretary Hank Paulson is working on a plan that would set more uniform standards for helping troubled mortgage borrowers. Instead, the FSA is working closely with UK lenders to get them to rein in growth prospects for bolstering their short-term liquidity.

This comes on the back of an announcement yesterday that Fannie Mae (NYSE: FNM) would be cutting its dividend significantly as it looks to raise more money to shore up its books.

I just can't seem to fathom the mess we've gotten ourselves into. While I'm not a doomsday-sayer, wasn't it clear to everyone involved that low fixed-rate mortgages would eventually reset to levels that most borrowers couldn't afford to pay back? Where were the controls?

Zack Miller is Managing Editor of IsraelNewsletter.com. Disclosure: Writer has no position in any stock mentioned as of 12/04/07.