Mortgage servicing problems and mortgage fraud have had a dramatic change in the industry. The automated machinery to approve as many loans as possible on the basis that the collateral will keep the issuers protected is over after the huge declines that we have seen in housing prices. While changes had to be made in the industry, the survivors that are still issuing mortgages are likely to reap the benefits of higher profit margins from less competition, and lower collateral values that have more potential for appreciation. The article below outlines the struggles that MetLife (NYSE:MET) is having in terms of exiting their mortgage business. At T&T Capital Management we are long MetLife and short puts on the stock which is trading at a large discount to book value, and a very low multiple on earnings, so obviously we don't believe these issues are going to be too dramatic for the company moving forward.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.