PSA: All major mortgage lenders are freaking out today

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So is this why the entire market is flipping out lately?

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Spreads in credit have blown wide open. You can only sell on /secure the debt at the moment if it has a very high yield as the perception of the risk attached to nearly all debt has gone through the roof. This effectively means that credit has become much more expensive and it will be much harder for credit companies to offer "cheap" products.

Coupled with rising base rate interest and you dont have a rosy picture for credit markets.

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Also, many of the big banks have tons of outstanding loans sitting on their balance sheets at the moment (bridges), so they're hardly eager to securitize the loans from the home lenders. This is in addition to the specifically poor performance of subprime home debt.

I think it'll get much worse if/when they open the books on some of the failing hedge funds. If all of sudden they are "worthless" - when were they at an unrealized gain position most recently? More importantly, did they take their carry interest based on these opaque pricing models?

There was also a WSJ article recently on mutual funds being exposed to this meltdown, but it seems much less. Luckily, there isn't the degree of conflict-of-interest as above (except overstating performance to increase AUM).