Some housing bubble news from Wall Street and Washington. Reuters, "Foreclosures and delinquencies among home loans that Countrywide Financial Corp. services rose in July to their highest in at least several years, the largest U.S. mortgage lender said on Tuesday. The company also said it made 14 percent fewer home loans in July than in June after tightening lending standards, while daily mortgage applications fell 15 percent to a nine-month low."

"Nonprime loans including 'subprime' totaled $1.8 billion, down 3 percent from June and 46 percent from a year earlier."

"'Our tighter lending guidelines (have) significantly curtailed total production,' Chief Operating Officer David Sambol said in a statement."

From Bloomberg. "Citigroup Inc., the biggest U.S. bank by assets, may lose as much as $3 billion in the third quarter because of the credit crisis, according to analysts at Sanford C. Bernstein & Co. LLC."

"The company may lose between $1.2 billion and $1.5 billion on loans to buyout firms and between $500 million and $1 billion on subprime mortgages in the three months ending Sept. 30, Bernstein analysts Howard Mason and Michael Howard said today."

"Citigroup's consumer unit holds $22 billion of subprime mortgages, and the investment bank has perhaps an additional $13 billion of subprime home loans, the analysts said. 'The risks are greater for the $13 billion subprime mortgage portfolio in the markets-and-banking business since these loans would typically not have been underwritten by Citi,' the analysts said."

"Prices on subprime debt have fallen about 20 percent since the end of June, twice as much as they did in the second quarter, the analysts said, so Citigroup could have lost between $2 billion and $3 billion."

"The Aegis Mortgage Corporation, a subprime lender based in Houston, filed for bankruptcy protection yesterday."

"The company said that it owed more than $100 million to creditors, including some of the investment banks that until this year financed many loans to subprime borrowers. 'Due to the extreme and unprecedented conditions Aegis presently faces in the marketplace, including the accelerated demands for capital, we were compelled to take the necessary and responsible step of seeking Chapter 11 protection,' the CEO, Dan Gilbert, said in a statement."

The Street.com. "Thornburg Mortgage plunged in furious trading after four brokerage firms downgraded the stock, saying the company may be forced to sell assets to meet margin calls."

"The downgrades come just days after S&P Ratings cut its long-term credit rating on Thornburg, citing tough condition in the debt markets. Thornburg and other mortgage companies have been hit hard by the collapse of demand for mortgage-backed securities."

The Kansas City Star. "Flanked on the phone line by Wall Street analysts, investor Frank Johnson spoke Monday for others holding stock in struggling NovaStar Financial Inc."

"'We want to know the answer to one question: Are you going to survive?' Johnson said during the Kansas City-based mortgage lender’s second-quarter conference call."

"CEO Scott Hartman aid the company had worked with its lenders to ensure its own credit needs and was working on a $150 million capital infusion, about a third of which it had raised. The company said last week it had lost $54.5 million in the second quarter."

From Newsday. "More than half of the nation's banks have tightened lending standards on subprime mortgages, a new Federal Reserve study shows."

"About 44 percent of banks, more than twice the percentage reported in the April Federal Reserve study, reported weaker demand for subprime mortgages over the past three months."

The Associated Press. "Lenders across the country, stuck with piles of loans investors wouldn't buy, are jacking up rates and imposing stricter requirements on even the most creditworthy borrowers."

"'Every single day, there are lenders putting a freeze on something,' says Dana Bain, president of Premiere Mortgage Services Inc., a Sterling, Mass., brokerage focusing on 'prime' borrowers. 'You're talking about a huge segment of the market being taken out' because of the more stringent lending guidelines, he adds."

The Globe and Mail. "The global credit crunch claimed a Canadian victim yesterday, as financing company Coventree Capital Group Inc. saw its stock plummet on news that investors have turned their backs on its $16-billion portfolio of loans."

"Coventree is a classic go-between; it buys and packages a variety of long-term debt from other companies, and resells the loans. Retailers, for example, sell Coventree the credit card loans they extend to customers. Auto makers pass on car loans. Banks hand over residential mortgages, which can include the U.S. subprime mortgages that have spooked markets."

"'You may be looking at the next leg of a deeper debt crisis, as problems in subprime mortgages give way to problems with liquidity in the asset-backed market,' said one Canadian fund manager who invests in Coventree's trusts."

"Deutsche Bank gave credit guarantees for the investment vehicle that nearly toppled Germany's IKB after it racked up billions in potential losses connected to the U.S. subprime mortgage market, sources close to the matter told Reuters."

"Sources familiar with the matter have said Deutsche was closely involved with the stricken fund, whose collapse German banking watchdog Bafin has warned could trigger the country's worst financial crisis in more than 75 years."

"The scale of Deutsche's involvement offers a rare glimpse into how Germany's flagship bank is involved in the subprime mortgage market. Germany has so far been the hardest hit by the problems that began with defaults on U.S. mortgages given to people with weak credit histories."

"Many industry watchers say German banks went into such risky business in the first place, because state-owned lenders dominate their home markets and have squeezed profits."

"Intervention by central banks has staved off a crisis, but investors need to know more about the true state of U.S. mortgage markets before calm can be restored to markets, a top manager at UBS said."

"'The original driver of this is the subprime markets in the U.S., and that is clearly an evolving scene,' said UBS Chief Financial Officer Clive Standish in an interview."

"'The learning is all about the concentration of risk and a clear understanding of what the underpinning securities genuinely are,' said Standish. 'Did people in XYZ in Japan, Australia or Germany understand what they were fundamentally doing was investing in people's mortgages in America and in a sector where they were of a lesser quality borrower?'"

"European Central Bank President Jean- Claude Trichet, who spearheaded a global injection of cash into the banking system, signaled the need for emergency funding is abating as financial markets settle."

"Trichet's statement suggests that 'after the storm, the ECB wants to give itself room to maneuver for the September hike' in interest rates, said Kevin Gaynor, an economist at Royal Bank of Scotland Group Plc in London."

"ECB council member and Bundesbank President Axel Weber said in a statement following Trichet's that 'a normalization of risk pricing is currently taking place in financial markets.'"

"Facing a major test, the Federal Reserve on Friday pumped billions of dollars into the U.S. financial system after a global credit crunch sent Wall Street into a dive and shriveled the nest eggs of investors large and small."

"The Fed, in a meeting Aug. 7, acknowledged that Wall Street turbulence, credit problems and a nationwide housing slump pose increasing threats to the economy. But it refrained from cutting rates and stuck to a forecast that the economy will weather the financial storm and grow gradually in coming months."

"'It seems like Bernanke might be more willing than (former chairman) Alan Greenspan to let financial stress play out to ensure investors don't feel emboldened in the future and take on more risk. There is a sense that Bernanke buys into that argument more than Greenspan did,' said Mark Zandi, chief economist at Moody's Economy.com."

"'We'll see if that is true in the next week or so. If markets remain unstable, it will be a test to see how closely the Bernanke Fed sticks to the Greenspan cookbook,' Zandi said."

From Marketplace. "Some pundits are pinning the blame for market uncertainty of late to former Fed chairman Alan Greenspan, but is it fair to second guess 18 years of decision-making in hindsight? Besides, he did warn borrowers two years ago, John Dimsdale reports."

"John Dimsdale: 'On the lecture circuit last fall, Alan Greenspan said the worst of the housing slump was behind us. Today, some pundits say Greenspan's low interest rate policies earlier this decade created a housing bubble.'"

"Two years ago, the man who coined the phrase 'irrational exuberance' did warn borrowers. 'History cautions that extended periods of low concern about credit risk have invariably been followed by reversal, with an attendant fall in the prices of risky assets.' Former Fed chairman Alan Greenspan, speaking in September of 2005."