Some housing bubble news from Wall Street and Washington. Reuters, "Standard & Poor's on Friday changed its rating outlook on Bear Stearns Cos. to negative from stable, indicating a greater chance of a downgrade over the next two years, as it warned of problems that could hurt the firm's performance 'for an extended period.' 'Bear Stearns has material exposure to holdings of mortgages and mortgage-backed securities, the valuations of which remain under severe pressure,' S&P said in a statement."

"The cost to insure Bear's debt with credit default swaps rose to around 163 basis points, or $163,000 per year for five years to insure $10 million in debt, from about 115 basis points at Thursday's close."

"'We believe Bear Stearns' reputation has suffered from the widely publicized problems of its managed hedge funds, leaving the company a potential target of litigation from investors who have suffered substantial losses,' S&P said."

From CNBC. "Bear Stearns and several members of its senior management repeatedly misled investors in two sub-prime hedge funds to keep them from withdrawing money even as the funds were losing much of their value, according to an arbitration claim obtained exclusively by CNBC."

"The investor, whose named is being withheld, allegedly lost $500,000 in the high-grade structured fund after listening to the advice of Cioffi, and his other Bear Stearns employees, during a series of conference calls that began in late 2006 through approximately June 2007, the claim says."

"American Home Mortgage Investment Corp plans to close most operations on Friday and said nearly 7,000 employees will lose their jobs as the lender becomes one of the biggest casualties of the U.S. housing downturn."

"American Home originated $59 billion in loans last year, and mostly to people with better credit than risky subprime borrowers. About half of those mortgages were adjustable-rate loans."

"American Home this week said that its own lenders cut it off, it faced escalating margin calls, and might liquidate assets. It also said it stopped taking loan applications. American Home's collapse shows how problems in the U.S. mortgage market are broadening."

From Bloomberg. "Union Investment Asset Management Holding AG, Germany's third-largest mutual fund manager, halted redemptions from a fund holding subprime mortgages after clients withdrew about 10 percent of the assets in the past month."

"'A lot of the subprime debt lies with European managers," said Iain Beattie, a consultant at Watson Wyatt Worldwide Inc. in London who advises pension funds. 'There could be more news to drip out on this.'"

"Union Investment has taken the steps 'because of illiquidity in the market,' spokesman Markus Temme said in a telephone interview today."

From MarketWatch. "Accredited Home Lenders Holding Co. lost almost half its market value at one point on Thursday after the company warned that turmoil in the mortgage market could put it out of business."

"A big chunk of Accredited's revenue used to come from gains it made when it sold mortgages at a premium in whole loan transactions. However, there are fewer of those buyers now. HSBC bought 30% of Accredited's mortgages in 2006, while CIT Group purchased more than 12%. But in April, HSBC stopped buying subprime loans and CIT stopped in July, Accredited said on Thursday."

"'We cannot assure you that we will continue to have any purchasers for our mortgage loans on terms and conditions that will be profitable,' Accredited warned."

"IndyMac Bancorp Inc. is joining rival lenders in making 'very major changes' to home-loan standards and charging higher rates because of a slump in mortgage securities, the company's CEO said."

"The market for mortgage bonds has become 'very panicked and illiquid,' CEO Michael Perry wrote in e-mail to employees. National City Corp. this week stopped buying second mortgages from other lenders and making some stated-income loans. Wachovia Corp., the fourth-biggest U.S. bank, decided to stop making Alt A mortgages through brokers."

"'Unlike past private secondary mortgage market disruptions, which have lasted a few weeks or so, our industry and IndyMac have to be prudent and assume that this present disruption, which appears broader and more serious, might take longer to correct itself,' Perry wrote."

"The credit tightening by Pasadena, California-based IndyMac, the ninth largest U.S. mortgage lender, and competitors on loans considered less risky than so-called subprime, comes when it's 'difficult' to trade even AAA-rated mortgage bonds that aren't guaranteed by government-chartered Fannie Mae and Freddie Mac, or federal agency Ginnie Mae, Perry wrote."

The Palm Beach Post. "First NLC Financial Services is laying off nearly half of its 1,340 employees nationwide, including more than a third of the headquarters staff of 323, in what company officials say is an attempt to turn around the money-losing business. Employees of the subprime lender were notified of the layoffs Wednesday."

"'The market conditions required we restructure and downsize,'' said Bernard Beckerlegge, chief legal officer of First NLC Financial, referring to the upheaval in the sub-prime mortgage industry. 'We all understand the conditions of the mortgage market,' he said. 'I can't believe anyone was completely surprised.'"

"Friedman, Billings put First NLC Financial up for sale in March after the company incurred a net loss of $124.2 million in the first quarter of this year as the subprime market collapsed."

The LA Times. "Giant title insurer First American Corp. posted a second-quarter loss Thursday because surging mortgage foreclosures indirectly increased the number of claims filed on policies sold by the company."

"First American said its title claims jumped 62% in the first half of this year from the same period in 2006. Frank McMahon, the company's chief financial officer, said he expected claims to climb even more in the second half of 2007."

"'Many of these claims are arising in connection with sub-prime loans, and it appears many of these claims involve fraud, forgery and other factors often seen where loans are made to borrowers in financial distress,' CEO S. Parker Kennedy told investors and analysts."

"Like lenders, title insurers were so busy during the boom that they weren't as diligent as they should have been in examining records, said Gerald B. Glombicki, an analyst at Fitch Ratings, which rates insurers and corporate borrowers."

"'Those years in particular, First American and many others in the title industry weren't doing their homework,' he said."

From MarketPlace. "Tom LaMalfa is an economist who advises mortgage companies."

"LaMalfa: 'I almost fell out of my chair when I was going through Countywide financial statements last week. Countrywide is one of the largest mortgage companies in America. Right now, almost one-quarter of its subprime loans are delinquent, and subprime lending represents almost half of Countrywide's total business. To me, that's shocking, we have never seen numbers like that.'"

"Countrywide's credit default swap spreads widened by almost 100 basis points, reaching more than 300 basis points, or $300,000 per year for five years to insure $10 million in debt, from 215 basis points at Thursday's close."

The Wall Street Journal. "Jittery home-mortgage lenders are cutting off credit or raising interest rates for a growing portion of Americans, extending well beyond the market for subprime loans for people with the weakest credit records."

"Lenders are tightening standards and 'raising rates like crazy,' said Melissa Cohn, chief executive of Manhattan Mortgage, a New York mortgage broker. She said Wells Fargo & Co. is charging 8% for a prime jumbo 30-year fixed-rate loan that carried a 6 7/8% rate late last week."

"Tom Lamalfa, managing director of Wholesale Access, a mortgage-research firm in Columbia, Md., expects that half or more of the market for no- and low-documentation loans will disappear."

"National City Corp., another large lender, said yesterday that it is suspending originations of stated-income loans. Wachovia Corp. said it had stopped making Alt-A loans through brokers. Wells Fargo told brokers this week that it was making 'day-to-day' decisions on the pricing and availability of Alt-A loans amid reduced investor demand."

"This credit squeeze 'will further crimp the effective demand for housing, and will make the late summer home-sales season even worse than the dismal spring season,' said Thomas Lawler, a housing economist in Vienna, Va."

"Lawler said he expects the credit squeeze will make 'the late summer home-sales season even worse than the dismal spring season.'"

"The U.S. subprime-market rout that wiped out $2.1 trillion from global share values last week has 'got a long way to go,' said Jim Rogers."

"'This was one of the biggest bubbles we've ever had in credit,' Rogers, chairman of New York-based Beeland Interests Inc., said."

"'This is the only time in world history when people were able to buy houses with no money down and in fact, in some cases, the builders gave them money for a down payment,' Rogers said. 'So this bubble is the worst we've had in housing and it's going to be the worst before its over cleaning it out.'"