Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of mortgage insurer Pacific Capital Bancorp (Nasdaq: PCBC) plunged more than 10% in intraday trading on normal volume. It finished the day down 6%.

So what: Much of the banking industry was down significantly today because investors are finally beginning to notice the sloppy paperwork and fraud that may be at the heart of the foreclosure mess. Bank of America (NYSE: BAC) has halted foreclosures all over the country, while JPMorgan (NYSE: JPM) is approximately doubling its review of foreclosure cases to about 115,000 and will stop using MERS, the electronic trading house, to process foreclosures.  Wells Fargo (NYSE: WFC) has not yet halted foreclosures, but it's beginning to appear it, too, engaged in "robo-signing" practices that are coming to haunt its competitors.

Add to all this the notice that Pacific received yesterday from Nasdaq warning of a possible delisting, and you can see why investors weren't too keen on Pacific today.

Now what: This is an uncomfortable situation for a lot of banks. While a national foreclosure moratorium may not be in the offing as federal regulators seem to be pushing instead for better documentation, heat at the state level, bad PR, and the lack of legitimate documentation are going to be a pain for banks caught up in the mess.

Interested in more info on Pacific Capital Bancorp? Add it to your watchlist by clicking here.

Ilan Moscovitz doesn't own shares of any company mentioned. Try any of our Foolish newsletter services free for 30 days. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.