Some housing bubble news from Wall Street and Washington. "Countrywide Financial Corp., the largest U.S. mortgage lender, said Thursday that 'unprecedented' poor conditions in the secondary-mortgage market are causing it to retain a greater proportion of mortgage loans than it sells."

"In a filing with the SEC, Countrywide said that while it plans to retain more loans until investor demand improves, it warned that a prolonged period of poor conditions 'could have an adverse impact on our future earnings and financial condition.'"

The Associated Press. "Countrywide said in an SEC filing late Thursday it has adequate funding liquidity, but added "'the situation is rapidly evolving and the impact on the company is unknown.'"

"Shares of Washington Mutual Inc. also dropped after the bank said in a filing with the Securities and Exchange Commission late Thursday that disruptions in the mortgage market could affect its liquidity."

"Washington Mutual said it its filing that deposits decreased by $12.57 billion for the six months ending June 30. The company is now expending billions in financing costs, a business that used to generate cash for the bank, according to the filing."

"Net cash the company uses in financing activities zoomed to $32.24 billion for the six month period. At the same time, its lenders are apparently demanding repayments."

From MarketWatch. " The company in its quarterly financial report said its liquidity 'may be affected by an inability to access the capital markets or by unforeseen demands on cash' such as a general market disruption."

"Washington Mutual said 'there has been significant volatility in the subprime secondary mortgage market which has spread into markets for all other nonconforming residential mortgages.'"

"American International Group on Thursday told investors the housing market would have to spiral to Depression-era levels before the insurer would be harmed by its exposure to the residential mortgage market."

"The world's largest insurer has exposure to subprime loans as a lender, investor in mortgage-backed securities and supplier of mortgage insurance. But AIG characterized its exposure as minimal and said it would take declines of 30 percent to 40 percent in home values to dent the market for mortgages with stronger ratings, where most of its holdings lie."

"'We believe that it would take declines in housing values to reach Depression proportions, along with default frequencies never experienced, before our AAA and AA investments would be impaired,' said Chief Risk Officer Bob Lewis, in a conference call."

From Bloomberg. "'We are experiencing home price depreciation almost like never before, with the exception of the Great Depression,' Countrywide Chief Executive Officer Angelo Mozilo said during a conference call with investors July 24."

"'Any company that has products related to home sales is in trouble,' said James Stratton, CEO of investment firm Stratton Management Co. 'Instead of a soft landing, it's a hard landing,' said Stratton, whose company has $3 billion in assets."

The Kansas City Star. "Troubled subprime mortgage lender NovaStar Financial reported a second-quarter pretax loss from continuing operations of $124.08 million as waves of bad news continued to pound the storm-tossed credit market."

"NovaStar cited several factors for its continuing hemorrhage, including an $83.6 million increase in its provision for credit losses as home loan delinquencies and defaults continued to rise."

"The company also took a hit on its mortgage securities as the value of its mortgage assets declined, requiring nearly $90 million in mark-to-market adjustments in the first half of the year."

The San Francisco Chronicle. "Nothing illustrates the swift collapse of the home-loan market better than Luminent Mortgage Capital of San Francisco, which is teetering on collapse the week after it assured investors it was fine. Luminent is a real estate investment trust that buys, sells and owns mortgages."

"So how did Luminent get into trouble? In late 2005, the company made a strategic shift that turned out to be the wrong move at the wrong time. Before that, Luminent avoided credit risk...by investing almost exclusively in mortgages insured by Fannie Mae, Freddie Mac or Ginnie Mae."

"Things started to unravel in early July, when investors became increasingly worried that problems in the subprime market would spread to Alt-A loans. Things got even worse in late July, when Countrywide Financial said its prime home-equity loans were defaulting at sharply higher rates."

"Suddenly, prices for mortgages without agency backing started to fall. Buyers headed for the exits, causing values to fall even more, creating a downward spiral."

"'I've talked to guys that run nonagency mortgage desks. They say they're throwing the baby, the bathwater, the sinks and the stoves out the window,' says Andrew Wessel, an analyst with J.P. Morgan."

From Reuters. "Fears of risky investments in an environment of troubled credit markets cut U.S. speculative-grade debt issuance in July, credit agency Standard & Poor's said in a report published late on Thursday."

"The number of U.S. speculative-grade issuances fell to four in July, compared with an average of 38 new speculative-grade issuances per month in the first half of 2007, the agency said."

"'Market volatility shut down the issuance pipeline in July 2007 in the U.S. speculative-grade market,' S&P said. 'Issuers faced rising risk aversion and a market hesitant to absorb low-grade issuance.'"

"U.S. regulators are scrutinizing the books of Wall Street's largest investment banks amid questions they are hiding losses from subprime mortgages, people familiar with the inquiry said."

"Analysts and investors have raised questions whether there are unreported losses from subprime-mortgages and collateralized-debt obligations, or CDOs."

"Fannie Mae sees 'no bottom' to shrinking US home prices and continued problems with borrowers paying their mortgages until the second half of 2008, the mortgage giant's CEO Daniel Mudd said today."

"In the meantime, Mudd said Fannie has asked its regulator, the Office of Federal Housing Enterprise Oversight, to allow it to expand its ability to buy mortgages from US lenders in order to help provide liquidity in the mortgage market."

"We'd like to be able to buy those mortgages,' he said in an interview with cable business channel CNBC."

From Bloomberg. "Federal Reserve Chairman Ben S. Bernanke was wrong. So were U.S. Treasury Secretary Henry Paulson and Merrill Lynch & Co. Chief Executive Officer Stanley O'Neal."

"The subprime mortgage industry's problems were contained, they all said. It turns out that the turmoil was contagious."

"Other types of mortgages are suffering. So are firms and banks that package the debt for investors. The ripples were felt in Europe and Asia, where central banks offered cash to banks amid a credit crunch. And some corporations, from countertop makers to railroads, are blaming the mortgage meltdown and housing slump for earnings that fell short of analysts' estimates."

"'Housing created a lot of ancillary economic activity and jobs, and now we are in the reverse process,' says Paul Kasriel, chief economist at Northern Trust Corp. in Chicago and a former Fed economist."

"'The subprime mess is now spreading to banks,' says Nariman Behravesh, chief economist at Global Insight Inc. 'A lot of international banks, especially those in Europe, did invest a lot in the collateralized debt markets, especially the subprime situation here in the U.S., so they're suffering.'"

"Paulson said June 20 that subprime fallout 'will not affect the economy overall.' This week on CNBC, he provided a less definitive assessment, saying that markets have been 'unsettled largely because of disruption in the subprime space.'"

"'We've had a major correction in that housing sector,' Paulson said. 'It will take a while for the impact of that to ripple through the economy as mortgages reset.'"

"'Most of the market has shut down,' says Doug Duncan, the Mortgage Bankers Association's chief economist. 'This is not a normal event.'"

"Peter Hebert, a broker with Allied Home Mortgage Capital Corp. in Ellicott City, Maryland, says it's getting tougher to find mortgages for his clients."

"For one self-employed borrower in Pennsylvania, with a 626 credit score, just above what's considered subprime, Hebert says he contacted three lenders. Last year, the borrower would have qualified for a 7.99 percent loan, Hebert says. This week, he received one offer for a 10.5 percent loan with a three-year prepayment penalty."

"'It would have been cheaper to use a credit card to pay for his house,' Hebert says."

"U.S. housing prices will fall this year, the first annual decline since the Great Depression of the 1930s, according to the National Association of Realtors."

"The inventory of unsold U.S. homes in May was the largest since the realtors group started counting them in 1999. Defaults and foreclosures may increase because about $1 trillion of payments on adjustable-rate mortgages are scheduled to rise this year, hitting a peak in October, according to Credit Suisse."