Although I get a lot of information for the MM blog from Google, yahoo and Reuters, I also subscribe to several RSS feeds through Google Reader to keep myself inf0ormed.  It just makes good sense if you want to keep up with the market all in one place.  I get a lot of good info in my email inbox, but the RSS feeds are also a good resource.  One feed, from Mortgage News Daily, gives me a lot of good resources to blog about.  My search of the feeds today was no exception.

MND reports that Freddie and Fannie, along with a lot of other investors, are taking a good long look at the contracts of loans purchased in the past few years, and are and are trying to force banks and mortgage companies to buy these troubled loans back.  Many of these contracts are aimed towards loans that default very quickly, or may show signs of fraud or mismanagement by the originating lender.  To me, that makes good business sense, because a lot of the current trouble in the marketplace is a result of unethical lending practices.

Case in point - Countrywide Mortgage revealed in its securities filing in May that its estimated liability for claims from investors was $935 million as of the end of March compared to $365 million a year earlier.  Three times the number is a lot of liability in my book.  It is hard to believe that the mortgage companies facing this kind of pain are always doing business in the best of practices.  In all fairness, though, we need to look at things like consumer confidence, the rising cost of oil and groceries, and the numbers of jobs recently lost to make an educated guess.  With all these things figured in, it is no wonder that investors are taking a long hard look.

Ambac Financial Group and MBIA are adding to the pressure. These bond insurers are working with forensics experts to determine whether or not a lot of these loans were made in good faith.  The loans were allegedly made to people who had good credit and could well handle the loan.  An MBIA official is quoted as saying “there are a significant number of loans that should not have been in these pools to begin with.”

It appears the market needs to weed out the dead wood and unethical lenders to even begin to make sense of the market.  In doing so, I hope that the playing field is a bit more level.  Maybe then we can begin to see the light at the end of the tunnel.