Subprime: Let the finger-pointing begin!

The crisis brought on by worries about shaky subprime mortgages continues to rattle Wall Street. Even as the storm rages, the blame game has begun.

Mortgage lenders
Mortgage lenders
Point your finger at mortgage brokers and appraisers, and they will quickly point theirs at the banks and mortgage companies. "Our industry shouldn't take any more blame than lenders and Wall Street," says Peter Ogilvie, president of the California Association of Mortgage Brokers.

To hear Ogilvie tell it, his mortgage brokerage, based in Los Baños, Calif., would often refuse to touch loans proposed by well-known banks, because the terms were so disadvantageous. One mortgage he says he declined was to a non-English-speaking, single-parent strawberry-farm worker, who was expected to pay around $12,000 a month.

Once they'd made all the loans they could reasonably make to qualified borrowers, the banks began relaxing the rules and reaching further down the credit scale. No income? No job? No assets? No problem! The industry even came up with a cute acronym for such deals: NINJA loans.

Many lenders are paying a price for such recklessness. Dozens of mortgage companies have gone bankrupt, including American Home Mortgage. And Countrywide Financial, the nation's largest mortgage lender - responsible for nearly one of every five mortgages in the U.S. - has seen its stock crater amid concerns that it will become a victim too.

Senator Barack Obama thinks the industry should pay more: He wants to fund a homeowner relief program by fining lenders "that acted irresponsibly or committed fraud." The mortgage providers made billions from the boom. And judging risk is at the very heart of what they are supposed to do. Otherwise, why not just hand the money out to anyone who asks for it? Oh, wait ... they did.
The borrowers Mortgage brokers Appraisers Mortgage lenders Wall Street Rating agencies The Federal Reserve
Danger: Steep drop ahead  Even if the credit crunch passes without a major catastrophe, the prices of stocks, bonds and real estate have a long way to fall. (more)
Subprime on the Rhine Fortune's Peter Gumbel investigates how Germany's IKB Bank became the biggest international victim of America's subprime-mortgage crisis. (more)
Mortgage mayhem Home-loan default rates across the U.S. have nearly tripled since 2006, especially for subprime loans. And with $850 billion in adjustable-rate loans scheduled to reset by 2008, defaults are likely to rise even higher. (more)
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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.