One question on the minds of Wall Street analysts and, no doubt, on the minds on many investors: "Is the mortgage industry getting its act together?

One will see research that makes an argument for or against the likelihood of the mortgage industry righting itself, but a reality most likely closer to the unvarnished truth argues that it's just too soon to tell. Wall Street, and yes Washington, need many more data points before analysts and policy makers can offer an informed conclusion, and perhaps a policy prescription or two.

The argument for the industry's recovery points to data points like CountryWide Financial (NYSE: CFC), up $1.82 to $21.63 late Tuesday afternoon, and Thornburg Mortgage (NYSE: TMA), down 43 cents to $13.07. Both remain high-risk investments, but one could make a case in which CountryWide, which is cutting costs, and Thornburg, which sold $20.5 billion in mortgage assets to increase liquidity, survive, bolstering the sector, as well as the hearts and minds of mortgage-backed securities holders.

Still, the above is contingent on the absence of a continuance of a large percentage of defaults in the subprime category in the quarters ahead. And right now, one can not incontrovertibly state that that will be the case.

(There is another scenario for the mortgage sector's recovery that deals with industry and systemic risk, but we'll save that discussion for another blog.)

The argument against the industry's recovery has been well-documented: an unusually large percentage of mortgage defaults in subprime, driven by creative [or aggressive] and certainly moderate/high risk lending standards, producing company bankruptcies, unpleasant news for MBS holders, and more choppiness (to put it mildly) in the equity and credit markets.

But until Wall Street and Washington learn more regarding the scope of the problem of subprime loans, it's a bit of a stretch to generalize about the fate of the mortgage industry. That would seem to suggest a need for a systematic, comprehensive inventory and investigation of all subprime loans, and assets linked to them, by the U.S. Federal Reserve, the U.S. Securities and Exchange Commission, or agencies representing the U.S. Congress, but it appears that, at least as of August 20, 2007, the public dialogue has not coalesced enough yet for that to occur.

More Countrywide Financial news

Peter Cohan: Is Countrywide (CFC) the next Enron?
Zac Bissonnette: Let Mozilo provide Countrywide (CFC) with cash
Douglas McIntyre: Could subprime problems hurt search engines?
Peter Cohan: Is Bank of America's (BAC) purchase of Countrywide Financial (CFC) a good bet?
Peter Cohan: What the mortgage meltdown means to you
Eric Buscemi: George Bailey, meet Angelo Mozilo
Michael Fowlkes: Countrywide Financial (CFC) adds to subprime panic
Peter Cohan: Could Countrywide Financial (CFC) be put down?