from The USA TODAY

It’s called “payment shock.” A typical home buyer with slightly blemished credit starts off with a $200,000 mortgage, a 7% interest rate and an initial monthly payment of $1,531. Everything’s fine for two years until that low “teaser” rate expires and jumps to 11.5%, adding a whopping $625 to the monthly payment.

What was a stretch becomes unaffordable, the homeowner falls behind and, in the worst case, loses the home.

This domestic tragedy, multiplied many times over, has triggered the meltdown in the subprime mortgage market, where people with less-than-perfect credit records go to find home loans. About one-fifth of the 6.5 million such loans originated in 2005 and 2006 will likely end up in foreclosure.

It’s still uncertain how far the pain will extend beyond the unfortunate homeowners and the housing market. But fallout from the subprime meltdown is already chilling the broader credit markets and threatening to spread to the broader economy. All of that terrifies the stock market, where the jittery Dow Jones average plummeted a sickening 387 points Thursday on credit worries.

There’s plenty of blame to go around. Predatory lenders and ignorant borrowers share much of it, but they will always be with us. A more pertinent question is where were the regulators who are supposed to curb excesses and protect consumers?

The answer is, mostly looking on and doing nothing.

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