by Aubrey Clark

Created on: May 29, 2008

Having been in the mortgage business a little over fifteen years I have made it a habit to read most of the press and articles written on the looming mortgage crisis. It would appear that most, if not all, columnist and writers feel that it is politically correct to point the finger at smaller brokers and lenders branding them "greedy lenders" and "predatory lenders.

Maureen Downey a columnist at the Atlanta Journal Constitution writes; "Lenders and brokers didn't fret about a borrower's long-term prospects of maintaining payments because they collected their profits at the closing table; the loans were then resold to investors." This attitude is common place in the media and follows political talking points as opposed to actually trying to understand the subject.

Even reporters whose primary focus is finance seem to cover the sound-bites over the substance of the mortgage crisis. Writers from every category of the media bemoan and opine about the unscrupulous lenders whose sole intention was to rip-off the poor and make millions in the process. The sad thing is that most of the reporters covering this story were probably incapable of spelling the word "mortgage" over a year ago. These same "Johnny come lately" reporters are the very same writers that are now passing their selves off as experts on the subject.

Here is how the system works for and mom and pop brokers and small lenders. Brokers primarily work with banks for "B paper" borrowers and sub-prime borrowers. These are the borrowers that fall between the cracks at most large banks and lenders. Almost all of the major banks Wells Fargo, Chase, Washington Mutual, Indy Mac and Countrywide have correspondent divisions set up for this very purpose. These institutions set the guidelines for the type of Alt-A and sub-prime mortgages they would buy. Once the loan is closed these banks buy the "paper" from the brokers to bundle up and sell on Wall Street.

As competition between these banking giants grew their tolerance for sub-prime underwriting standards dropped for specific niche borrowers. Soon we had a dozen banks each having their own sub-prime division and competing for different niches in the sub-prime market. In an attempt to gain more market share these banks would employ account executives to visit the small brokers and lenders to "teach" the loan officers how to get certain borrowers through underwriting in their specific niche's.

As a result of competition, the capacity to qualify for mortgages was

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