Gain-on-sale accounting rules are a mess, but I wouldn’t blame them for all the sub-prime mortgage woes. Around here, unchecked greed combined with the floating consensus that if you don’t have 5,000 square feet and granite countertops (even if they’re the low-end tiled kind) you just aren’t human, comes to mind first.

Nevertheless, I loved the headline: Subprime Mess Fueled by Crack Cocaine Accounting.

Maybe it’s all a ruse to make people think accounting is a thrilling, risky, gang-in-streets profession?

There are a lot of people in the world that hate corporate America - I’m not one of them. They are pounding spammers with reckless abandon and the latest win is at Earthlink, where a judge has awarded them $11 million from the pockets of a mortgage spammer.

I was wondering when mortgage spammers were going to get a clue - the real estate boom looks like it is over. Since that didn’t get them to stop, maybe this Earthlink win will.

Liquidity makes markets. Without a fair share of buyers and sellers to keep the spreads reasonable, nothing works. If you were to suck a big player out of the market, say one that provides a lot of “insured liquidity,” the same thing would happen, inefficiency, if not wholesale disruption.

What are some of the signs that a big player desperately needs an exit door?

Start with some fraud. Toss in backing out of early stage deals. Throw in a mass exodus of its managers.

I think that is plenty in the way of signs.

According to a recent poll, plenty of folks would be willing to go double-or-nothing on their personal debt at an online casino.

This all comes despite the poor odds, none to surprising as most people don’t calculate risk when they sign the aggregious contract on that new European car (their thought at the time is they will just draw down the home equity line to pay it off).

Little do they know, while they are sitting around with their thumbs up their butts hoping for a miracle of chance, the farm has already been bet for them.

They’d be well served to read this instead.

Mortgage News Daily ran an informative story a few days back on the growing scam of mortgage phishing. The scammers send out emails offering low rate, low fee refinancing and debt consolidation loans, and use the standard “even if your credit is bad” language. This an especially dangerous situation, and likely is going to be an especially effective one as well. There are several reasons for this…

First, offers for low-rate, fee-free, and built for previously bankrupt borrowers, are a dime a dozen. I get five a day, and I bank with only one company for everything, and have been with them almost a decade. Second, there are so many lenders out there, from money center banks down to one-man loan brokerage shops, it is getting more difficult to determine who is who. Third, and likely the scariest piece, someone looking hard at a loan offer is going to expect having to give up a decent supply of their personal information. Last but not least, many of the people who fall for the gag are likely not in the financial position to bear the brunt of a drained checking account.

I suspect we are going to see a lot more of this. Don’t be surprised if this phish makes its way into the payday loan, rent-to-own, and other sub-prime scenarios.

You can read the entire story here: Mortgage Phishing, SPAM, and Email Scams.

An Economist report a few days back was quietly entitled Building the American dream…or nightmare?

There wasn’t much in this article that came as a surprise, until the near end…..

What caught me off guard were the comments about mobility. The “anchor” effect a large (or overextended) mortgage can create, can have a detrimental effect on a family’s ability to migrate to booming micro-economies. From the article, it was noted that West Virginia has one of the highest home ownership rates, as well as one of the highest employment rates.

What does happen as jobs shift to different regions, and workers cannot afford to let go of their residences (either due to transaction costs, or because they simply owe more that the home is worth)? Does the employer bear this burden? If the employee is important enough to the business, maybe so.

It is certainly may be worth thinking about a little more.

Meanwhile, Greenspan warning about financial meltdown if Fannie and Freddie are not reined in certainly IS worth thinking about.

If someone out there has any statistics on the change in the total market capitalization of residential real estate, as well as collateralized mortgage obligations outstanding, since 1995 (’round about the time CMOs hit the street hard), I’d like to see them. I bet they grew in lockstep.