Some housing bubble news from Wall Street and Washington. The Boston Globe, "Countrywide Financial Corp., the nation's largest mortgage firm, said yesterday it has 'tightened' up on its lending, and another large provider said it would stop making new loans altogether, deepening the crisis in the nation's mortgage industry."

"First Magnus Financial Corp., based in Tucson, which purchases mortgages from loan brokers and is one of the 10 largest mortgage wholesalers in New England, yesterday said it would no longer fund new loans."

"First Magnus, which has offices in Needham and Lawrence, said the 'collapse' of the investment market for mortgages has left it 'with no viable alternative' but to cease lending."

"Rosemary O'Neil, president of the Massachusetts Mortgage Association, said some house hunters are likely to see the industry shake-up as benefiting them in the long run."

"'They may decide, 'Let's wait until the prices go down some more,' she said."

The LA Times. "Anxious customers jammed the phone lines and website of Countrywide Bank and crowded its branch offices to pull out their savings because of concerns about the financial problems of the mortgage lender that owns the bank."

"Bill Ashmore drove his Porsche Cayenne to Countrywide's Laguna Niguel office and waited half an hour to cash out $500,000, which he then wired to an account at Bank of America."

"'It's because of the fear of the bankruptcy,' said Ashmore, president of Irvine's Impac Mortgage Holdings, which escaped bankruptcy itself recently by shutting down virtually all its lending and laying off hundreds of employees."

"'It's got my wife totally freaked out,' he said. 'I just don't want to deal with it. I don't care about losing 90 days' interest, I don't care if it's FDIC-insured -- I just want it out.'"

From Bloomberg. "Countrywide Financial, the nation's No. 1 mortgage lender, was forced to tap an $11.5 billion line of credit Thursday as the global financial crisis curbed access to short-term financing."

"'When a company draws on its bank lines, it just basically gives off the impression that it has run out of options,' said Christopher Wolfe, managing director at Fitch Ratings, which Thursday dropped Countrywide to BBB+, its third-lowest investment-grade rating. Credit rating agency Moody's Investors Service downgraded Countrywide's senior debt rating to 'Baa3' from 'A3.'"

"'Typically these bank lines are there but not really meant to be used,' Wolfe said."

"'We're in this situation where one of the biggest home lenders in the country is in significant financial difficulty and is being forced to take fairly extraordinary action to maintain its financial viability,' said Tony Hughes, managing director of credit risk for Moody's Economy.com 'This means the threat of a credit crunch is very real. It means that mortgage finance generally will be hard to come by,' he said."

"'Industry trends are not improving,' he wrote. 'Home prices are 13 percent to 14 percent overvalued (which could take several years to play out).'"

The Daily News. "Paul J. Miller, an analyst at Friedman, Billings, Ramsey & Co., said in a research report that Countrywide's survival depends on how long the mortgage crisis lasts."

"'We do believe there is a scenario in which the current liquidity crises last for longer than three months and CFC is forced into bankruptcy,' he wrote. 'It will be ugly, but it can happen!'"

"If it persists for more than a month, he said, Countrywide might be forced to sell assets at a deep discount."

From McClatchy Newspapers. "'What we're going through now is unlike anything we've seen before. All financial crises have their unique characteristic, this one is characterized by a seizing-up in the home-mortgage market,' said Lyle Gramley, a former governor of the Federal Reserve System in the 1980s."

"Gramley was referring to the spate of bankruptcies by companies that issued home loans to risky borrowers -- and increasingly companies that gave loans to creditworthy homeowners."

"Gramley's concerned that there aren't good measures right now of how much lenders are pulling back. 'None of us knows for sure how much credit availability has declined, but to be sure it is substantial,' he said."

"The Federal Reserve lowered the interest rate it charges to banks and acknowledged for the first time today that an extraordinary policy shift is needed to contain the subprime-mortgage collapse that began roiling the world's financial markets two months ago."

"Today's decision shows policy makers understand 'the various different tools the central bank has at its disposal,' said Neal Soss, chief economist at Credit Suisse in New York, who worked as an assistant to former Fed Chairman Paul Volcker. 'This is a masterful move because it doesn't actually feed some of the concerns about moral hazard' of bailing out investors, he said."

The International Business Times. "On the same December day Merrill Lynch & Co. Inc. paid $1.3 billion for a subprime lender, the world's largest brokerage got a rude introduction to risky mortgages."

"Merrill Lynch's newly minted First Franklin Financial Corp suffered a loss of nearly $300,000 on a soured home loan to a lab assistant from a gritty, blue-collar town north of Boston."

"Lab assistant Marielite Hardy received $670,000 in loans from First Franklin in March 2006 to buy a multi-family home in Revere, Massachusetts. Her loan application, submitted by mortgage broker National Lending Corp., listed her monthly income as $12,000."

"This month, First Franklin accused the Houston-based broker of inflating Hardy's income by about $9,000, according to a lawsuit filed in U.S. District Court in Boston."

"After funding the Hardy loans, First Franklin sold the first loan on the property to a U.S. unit of London-based bank HSBC in the secondary mortgage market. First Franklin said Hardy did not make a single payment. HSBC demanded First Franklin buy back the loan, according to court records. First Franklin did and then sold it in a distressed sale, taking a $295,908 loss."

"Several months after First Franklin funded Hardy's loan, the lender received her wage verification from her employers. The documents showed that her wage income fell far short of justifying the money she received."

"'These lenders want to loan money to people without guidelines,' said Hao Nguyen, National Lending's operations manager. 'And then they get burned.'"

"A few bad loans at First Franklin are not a disaster for Merrill Lynch, a financial powerhouse with $1 trillion in assets, But the subprime mortgage industry's crisis has sidelined Merrill's strategy for buying the lender in the first place."

"'It wasn't the best move,' said John Meara, president of Argent Capital, which owned 309,000 Merrill shares at the end of June. 'It's not going to make or break the company, and I'm sure the company didn't factor in what's happened to the subprime industry. It's hard to predict Armageddon.'"

From Inman News. "Ratings agencies Moody's Investors Service and Fitch Ratings have downgraded or are preparing to downgrade billions in securities backed by subprime second-lien mortgages."

"Bear Stearns Cos. moved to cut jobs at two home-lending units because of the housing slump. The fallout from the subprime-mortgage crisis threatens to cut Bear Stearns's profit by as much as 13 percent this year."

"Some investors consider Bear Stearns a possible takeover target now that its market value has dropped to $16.6 billion from $22 billion at the end of its fiscal year in November."

From Reuters. "Falling stock prices, a slowdown in the housing market and tighter credit could hurt auto sales, although there has been no big impact yet, a senior General Motor Corp executive said on Thursday."

"'It is never good when the stock market goes down. It takes wealth out of the economy...people feel poorer and decide to defer major purchases,' Bob Lutz, GM's vice chairman and head of product development, told reporters."

"Like many lenders, GMAC's ResCap unit has struggled as falling home prices, and rising interest rates have made it tougher for many homeowners to keep up with mortgage payments."

"GMAC CEO Eric Feldstein said in July that 'widespread weakness' in housing would persist this year."

"Lutz, however, described the downturn as a 'momentary correction.' 'We have a very serious credit crunch in the U.S., but that was triggered by a bubble-like prosperity due to sub-prime mortgages and a building boom that was unjustified,' he said."