All the online rate advertising websites claim to have the best mortgage rates. It is easy to claim you have the best mortgage rates when you have no oversight.

There is more than one lawsuit claiming the rates Bankrate.com, for example, post are manipulated by the companies that advertise on their site. A recent $46,000,000 verdict was pinned on NovaStar for allegedly making false mortgage rate postings on Bankrate.com. They plan to appeal.

The FTC this week announced a “crack down” on mortgage advertisers who use deceptive language in there solicitations. This comes on the heels of a statement earlier in the summer by Federal Reserve Chairman, Ben Bernanke, that the Fed plans to make changes to federal rules on mortgage marketing by the end of the year. This action and announcement seems “consumer friendly” and all, but it really is just…too little, too late.

Why?

First, you must realize that most of the ad campaigns are run by the big banks or their subsidiaries.

I‘m constantly getting bombarded with questions about exactly how the meltdown was allowed to happen by readers, reporters, and consumers. So I thought I’d take a minute and explain just how the hedge funds used subprime mortgages and how they got caught with their pants down in the last few months causing the mortgage meltdown and the credit crisis that followed.

The typical subprime mortgage hedge fund trade goes like this:

1. Borrow in Japan paying 2% interest, then convert to US dollars.
2. Invest US dollars in US CMO (collateralized mortgage obligations) paying 8% (subprime mortgages get higher yields).