Mortgage banking behemoths Wells Fargo and Countrywide Home Loans are dealing with ongoing and more recent charges of predatory lending. Predatory lending is a moniker usually reserved for the most egregious examples of unscrupulous lending behavior. The consumer groups ACORN and NACA are recently shining the light on what mortgage brokers like myself have known for a very long time…

The dictionary definintion of a “shill” is: a person who publicizes or praises something or someone for reasons of self-interest, personal profit, or friendship or loyalty. Well, if that’s the definition then that is exactly what Presidential hopeful, Senator Dodd did yesterday in his press conference.

Who was he shilling for you ask?

None other than the enormous campaign contributing mortgage giant, Fannie Mae..I say.

With the Fed jumping in on Friday to calm the markets it would be easy to be fooled into thinking the worst of this financial irresponsibility is over…it’s only just begun!

I wrote an article a few months back with a graph outlining just how far into the future the recasting of these adjustable rate mortgages, interest only mortgages, and Option ARM loans actually takes place. (Click the link above). Today I’m reminded of that when reading a post by Gary Kaltbaum on Tradingmarkets.com where he points out the time line for the recasting of all the adjustable rate mortgages.

Merrill Lynch yesterday downgraded the stock of Countrywide Home Loans (CFC ticker symbol) and speculated on the analyst call just how they could go bankrupt. First this was irresponsible and reckless on the part of Merrill…or was it?

Since the call yesterday a lot has happened:

1. The stock has fallen about 10 points.

2. A class action stock holder lawsuit was filed claiming the stock holders were mislead about Countrywide’s strength.

The subprime mortgage meltdown which started with US Bear Stearns two multi-billion dollar hedge funds going under is now spreading across the pond to Europe where French bank BNP Paribas froze three similar funds (total market value about $3.79 billion) invested in US subprime mortgages sending the Dow down 200 points according to the AP wire.

This prompted the European Central Bank to pour in $130 Billion (the largest in history) in overnight funds to hopefully stave off a panic. Our own central bank, the Federal Reserve, followed suit pumping in $24 Billion to the US banking system.

Presidential candidate Hillary Clinton unveiled her “mortgage reforms” on the campaign trail yesterday. You won’t be surprised to hear they are more pandering than problem solving. Her rhetoric was emotionally charged placing the blame specifically and solely at the doorstep of the mortgage brokers. No mention was made of Wall Street mortgage investors, wholesale lenders, retail mortgage divisions of home builders, or big banks.

Mortgage Brokers Get the Blame

Mrs. Clinton said in a report on Financial Times website, FT.com:

Remember this date: August 3rd, 2007. This is the day Jim Cramer melted down right along with the subprime home mortgage market and Bear Stearns. I wrote an article about a month ago on the Bear Stearns implosion due to subprime home mortgage exposure, forecasting their demise, and here it is.

The video clip below shows the panic the fund managers are experiencing and even though Cramer is known for his theatrics this seems like genuine fear to me. He uses words like “Armageddon”, calls Bill Poole “shameful”, and calls on the Fed to “open the discount window”.