Some housing bubble news from Wall Street and Washington. "Subprime lender NovaStar Financials shares tumbled nearly 40% Wednesday after reporting a fourth-quarter net loss. Problems with mortgages originated in 2006 knocked $17.4 million off fourth-quarter earnings. Provisions for losses on loans NovaStar has been forced to repurchase cut $13.4 million off results. More provisions for losses on a package of early 2006 mortgages the company securitized cost it another $10.3 million, NovaStar said."

"NovaStar has tightened underwriting guidelines on its mortgages in response to the housing market slowdown, Lance Anderson, chief operating officer, told analysts during a conference call on Tuesday."

"'What happened in 2006, in the housing market we had a swift downward shift which caused the guidelines that we had in place to no longer be appropriate,' Anderson said."

From theStreet.com. "'The credit performance of our portfolio, and specifically our 2006 originators, deteriorated during the fourth quarter, resulting in impairments on mortgage securities and additional loss provisions for loans held-in-portfolio in the REIT,' says Scott Hartman, NovaStar's CEO."

"'Also, our gains upon securitization were reduced during the quarter because of lower whole loan prices. Furthermore, during the fourth quarter, we experienced a greater level of loan repurchase requests due to early payment defaults than we have historically,' Hartman said."

"NovaStar is also considering whether it should retain the company's real estate investment trust status, it says. NovaStar says it expects to 'recognize little if any taxable income' through 2011."

National Mortgage News. "As the subprime carnage continued last week another concern was raised. One non-depository mortgage executive told us that warehouse providers (Merrill, others) have a provision in their contracts, stipulating that a lender must be profitable at least every other quarter."

"In other words, if a mortgage banker loses money two quarters in a row, they could potentially lose their lines."

The Charlotte Observer. "Wells Fargo Home Mortgage will close a Fort Mill, S.C., operations center that employs 250 people, the company said Tuesday. The center Wells Fargo is closing is part of the company's high-rate lending business. The employees approve funding for loans made by mortgage brokers, and also purchase loans made by other lenders. Wells Fargo said it will close a similar operations center in California."

"The company has responded to the defaults by tightening the requirements for new loans, further shrinking its volume."

"'We tightened our credit policy,' Wells Fargo said in a statement. 'This decision directly impacts our nonprime loan volume, which in turn impacts staffing levels in the areas devoted to managing these loans.'"

The News & Observer. "Eagerness among mortgage lenders to increase their fee income pushes them to sell as many loans as possible, even ones they know borrowers can't afford, outgoing Federal Reserve Governor Susan Bies said. That is driving more people to fall behind on payments and default, she said."

"'There's a real transaction-based mentality in the industry today that you didn't have 20 years ago,' Bies said. 'To make a decision faster, and try to get the customer to say yes to you before they go and shop anywhere else, they'll waive terms.'"

From Inman News. "Chris Flanagan, managing director and head of global research for JP Morgan Securities, said approximately 35 percent of all subprime mortgage borrowers could have a difficult time meeting their loan obligations when their adjustable-rate mortgages hit their first adjustment period."

"'These are consumers who were getting into 100 percent loans when home prices were softening,' Flanagan said. 'The more troubling characteristic were the lenders willing to reach to make those mortgages available.'"

"Flanagan's research revealed that 10 percent to 15 percent of all new loans originated in the fourth quarter of 2005 and all of 2006 were subprime loans. The amount of money at stake could be $200 billion, with as many as 500,000 to 1 million consumers in potential jeopardy."

From Bloomberg. "Denise Hamilton was earning the biggest salary of her life painting and packing refrigerator parts until Collis Inc. decided to shut its Evansville, Indiana, factory and she was fired."

"Hamilton lost her $11.20-per-hour job last month because Collis's main customer, Whirlpool Corp., the world's largest appliance maker, cut production after a drop in home sales reduced demand for new refrigerators, washing machines and dishwashers. Whirlpool fired 500 workers at its Evansville plant and Collis fired 160, including Hamilton."

"'Working for Collis was the best job of my life,' said Hamilton. 'Money is going to be tight.'"

"New and existing home sales dropped almost 10 percent last year, depressing demand for products from copper pipes to kitchen sinks and resulting in the loss of about 100,000 jobs in the U.S. Housing-related unemployment probably will increase in 2007, according to the Joint Center for Housing Studies at Harvard University."

"By the end of this year, job cuts at companies including Whirlpool, Masco Corp. and Emerson Electric Co. may exceed the fallout from the 1991 housing slump, said Paul Puryear, managing director at Raymond James & Associates."

"'The fallout in the early 1990s was much worse than what we've seen so far, but this downturn is not over,' said Puryear. 'The full impact hasn't hit yet.'"

"'We're going to see other industries have a hangover long after the housing recession is over,' said economist Richard Yamarone. 'Housing has a ripple effect through the whole economy, from the carpet makers to the dishwasher salesmen.'"

"'For the first time in many moons, the fourth quarter was a time for slowing sales in the United States and booming sales everywhere else in the world,' Caterpillar CEO James Owens said. 'I think we will see that essentially be the pattern for 2007. My guess is it's going to get a little bit worse,' Owens said."

From MarketWatch. "Home Depot Inc. on Tuesday said its fourth-quarter profit plunged 28%, hurt by a slump in the housing market. Frank Blake, recently installed as chief executive, called results for the most recent fiscal year 'disappointing' and said they reflect 'challenging' conditions in the housing market."

"Blake warned that 2007 would be challenging as the housing market continues to shake out. 'We anticipate continuing headwinds in 2007,' he said. 'There is a lot of inventory to work through in housing. If you look at the back half of '07, we're not terribly optimistic, but we could see things start to improve then, but...it won't be a dramatic turnaround,' he said."

The Ann Arbor News reports from Michigan. "A federal agency announced Monday it has assumed control of operations at Ann Arbor-based Huron River Area Credit Union. Regulators from the National Credit Union Administration, the independent federal agency that charters and supervises federal credit unions has taken over the credit union's management, placing it in conservatorship."

"'We found it's been operating in an unsafe and unsound manner and is in imminent danger of insolvency,' said Kathy Fagan, spokesperson for the Michigan Office of Financial and Insurance Services. 'This was something that came up suddenly.'"

"A credit union is typically placed into conservatorship when its loan or investment portfolios are judged by regulators as too risky, putting the institution's viability in danger, said David Adams, chief executive officer of a trade association that represents credit unions, including Huron River."

"'Most often regulators are identifying problems well in advance of it being a crisis and I suspect that's what's happened here,' said Adams."

"Sreedhar Bharath, a professor of finance at University of Michigan's Ross School of Business, speculated the move may be due to the actual or anticipated future foreclosures due to the area's recent job losses. He also suggested the move may be an attempt keep customers, including other financial institutions, from panicking and withdrawing their money."

"'Home lending in Michigan in this climate is a risky bet. They may be being cautious and taking action even before bad things are happening,' he said. 'My guess is you might see more of this happening in the future. Foreclosure rates are up in Michigan.'"