The Texas Ratio everyone is using to speculate on the health of the nation’s banks has a problem. The calculation belies a different conclusion in many cases and does not necessarily mean bank weakness.

Texas Ratio Defined

Gerald Cassiday of the RBC Capital Markets, coined the name for his calculation which grew out of the Texas S & L meltdown of the 1980’s.

ResMAE, a large stated income lender, announced a year ago the discontinuation of all their stated income loan programs used for self-employed borrowers. Since then virtually all sources of loans for the self-employed are all gone.

A Florida mortgage broker found a way to rip-off people he never even met: the home seller! Mortgage broker greed reaches an all time high with this unconscionable scam.

So I was over checking my blog on ActiveRain and ran upon a Florida real estate agent who sparked this post. His comment said a buyer client was told to ask the seller for 6% in closing costs!

Mortgage stock prices are dropping like a stone creating a huge profit opportunity. I wrote a post 10 months ago on my ActiveRain blog showing folks how to “short” mortgage stocks to bank these profits.

Since then a most mortgage stock prices have literally freefallen. Right after that post, Novastar’s stock (symbol: NFI) dropped 40% in one day down to about $15 a share. Today Novastar has dropped even further down to $2.08 another 60%.

ELoan Mortgage bailed out on the subprime market about a year ago. Back then ELoan Mortgage was the first of many lenders to turn their backs on the subprime borrower.

As I predicted a few posts back, the bruised credit borrower would be left out in the cold the minute the big boys figured out the subprime loans they pushed so feverishly just 18 months ago are ticking time bombs ready to explode.

Bad credit mortgage loans are for borrowers who have credit issues and do not fit traditional mortgage credit standards. Bad credit mortgage programs are also known as B paper or subprime loans.

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 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.

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.

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.