Some housing bubble news from Wall Street and Washington. MarketWatch, "The U.S. housing market showed signs of major mortgage disruptions, with contract signings on existing homes falling by 12.2% in July -- the largest drop since the pending homes sales index started in 2001, the National Association of Realtors reported Wednesday. Pending sales are 16.1% below July 2006. The July data reflects trends prior to the mortgage meltdown in August."

"'It's difficult to fully account for mortgage disruptions in the index, and our members are telling us some sales contracts aren't closing because mortgage commitments have been falling through at the last moment,'' said Lawrence Yun, NAR senior economist, in a statement.

"Yun said abnormal factors are clouding the horizon. 'These temporary problems are primarily with jumbo loans, and there are continuing issues for subprime borrowers, but there are no serious problems for the majority of buyers who qualify for conventional financing or FHA-insured loans.'"

"'If lenders focus on the essentials of creditworthiness and adjusted valuations based on comparable sales, and ignore speculation on what might happen in the future, broader stabilization will come sooner rather than later,' Yun said."

"The PHSI in the South was 15.2 percent below a year ago. In the Northeast, the index is 10.0 percent lower than July 2006. The index in the Midwest was 15.8 percent below a year ago. In the West, the index was 21.8 percent below July 2006."

From Bloomberg. "U.S. bank regulators, facing the worst housing slump in 16 years, called on mortgage lenders to stave off foreclosures by cutting or postponing home payments for cash-strapped borrowers. The Federal Reserve joined with the Treasury Department in making the unprecedented appeal."

"The public move by the regulators is 'extraordinarily unprecedented' since they've historically made such recommendations behind the scenes, said Gilbert Schwartz, a former associate general counsel at the Fed."

"The banking agencies are taking a voluntary approach since 'securitization transactions are contractual in nature' and 'regulators can't force institutions to breach these contracts,' said Schwartz."

"'The Fed's institutional culture doesn't lend itself to this,' said Lou Crandall, chief economist at Wrightson ICAP LLC. 'They don't get here without sharing some of the anger in general in Washington at the lending practices.'"

"The rates banks charge each other to borrow in dollars for three months rose for a 10th day as concern about losses on securities linked to U.S. subprime mortgages kept lenders from offering cash for any time longer than a few days."

"Lending rates have risen so fast that the Bank of England today offered to provide additional cash to ease the squeeze and the European Central Bank said it may act tomorrow to soothe money markets if needed. The moves came amid concern banks may be sitting on undisclosed losses as a result of late payments by homeowners with poor credit histories."

The Financial Times. "'What is happening right now suggests that the moves by the Fed and ECB just haven’t worked as we hoped,' admits one senior international policymaker."

"Or as UniCredit analysts say: 'The interbank lending business has broken down almost completely...it is a global phenonema and not restricted to just the euro and dollar markets.'"

"The high demand from banks to secure liquidity for the next three months, coupled with their desire not to lend out what liquidity they have, has made it virtually impossible to execute trades – even at the official prices quoted for such borrowing."

"That has created some extraordinary dislocations such as the fact that the cost of borrowing three-month money in the sterling Libor markets is now higher than borrowing six-month or 12-month money. 'The system has just completely frozen up – everyone is hoarding,' says one bank treasurer. 'The published Libor rates are a fiction.'"

The Financial Post. "Owners of billions of dollars of troubled asset-backed commercial paper issued in Canada could lose as much as half of their money because of poorly disclosed exposure to derivatives trades, industry observers are warning."

"Commercial-paper markets around the globe have been struggling with fallout from the subprime mortgage crisis in the United States, but the situation is worst in Canada."

"The vast majority of about $35-billion of non-bank ABCP is backed by risky bets on credit default rates that are now so far underwater that investors could be looking at losses as high as 50 on the dollar, said Edward Devlin, Canadian portfolio manager for highly respected bond fund manager Pacific Investment Management Co. LLC."

"'You've got to think people are not going to be pleased about that,' he said in an interview."

From Newsday. "Delta Financial Corp., the troubled Woodbury-based subprime lender, said Wednesday it has bundled together for sale bonds backed by $900 million in mortgage loans, a move the company hopes will increase its ability to borrow money to originate more loans."

"Hugh Miller, Delta Financial's chief executive officer, said in a statement before markets opened for trading that pricing the security was 'paramount' for the company 'in light of the rapid deterioration in the credit markets.'"

"Miller added, the pricing was much less favorable than in the past, 'reflecting the highly illiquid market conditions where virtually no mortgage-related securitizations are being consummated or sold.'"

"Two weeks ago, Delta said that it will be cutting 300 jobs, most of them in Florida, Texas and California, but some on Long Island, because of the current market environment."

From Reuters. "Planned U.S. lay-offs rocketed in August as the housing slowdown and subprime mortgage debacle led to record job cuts in the financial sector, an independent report showed on Wednesday."

"Announced lay-offs surged 85 percent to 79,459 in August from 42,897 in July, according to Challenger, Gray & Christmas Inc."

"'Nearly half of the August cuts came from the financial sector, as dozens of mortgage and subprime lenders caved under the pressure of a sinking housing market,' Challenger, Gray & Christmas said in a statement."

From CNN Money. "Home Depot's CEO Frank Blake said Wednesday that the softness in the housing market and the subprime mortgage squeeze will probably carry through much of 2008."

"'In the beginning of this year, we had hoped to see the start of some bottoming in the housing market in the back-half of 2007. We don't think this will happen,' Blake told an analysts gathering."

"He added that 2007 'will continue to be a tough year.' More importantly, he said 'much of 2008 will face into the same headwinds.'"

"'There's a lot of speculative activity in the markets. And the subprime issue is putting additional pressure on consumers. We will see this play out over the next few quarters,' Blake said. On a regional basis, Blake said Florida and California were two markets that had suffered the most dramatic slowdown in terms of Home Depot's business."

"Daiwa House Industry Co., Japan's second-biggest homebuilder by market value, wants to cut local costs and expand in China as the developer is concerned a property 'bubble' may burst, slashing land prices."

"'The property market has become dangerous,' Takeo Higuchi, chairman of the Osaka-based homebuilder, said in an interview. 'I wouldn't be surprised if the real estate bubble goes bust.'"

"Land prices are key for Japanese homebuilders like Daiwa House because declines in population are shrinking the residential construction market. Housing starts in the first half of this year averaged about 23,000 a month fewer than they did 20 years ago."

"Japan's land price growth quickened last year to 8.6 percent from 0.9 percent in 2005. The gain was the fastest since the National Tax Agency started to compile national land figures. The rapid gain in land prices has become worrisome for Daiwa House, Higuchi said."

From Marketplace. "Stacey Vanek-Smith: 'Gone are the days when you could land a home loan with less-than-sterling credit and no money down. Mortgage lenders and big banks have gotten very finicky in the last few weeks.'"

"Mitch Ohlbaum is a mortgage broker in Los Angeles. He says if you want to get a decent interest rate now, you'd better have great credit and be prepared to put down a big chunk of change. Mitch Ohlbaum: 'For now, the standard is really going to be 10 percent if you want to buy something. Which in the real world's not so bad, it's just a little bit more difficult where we live, where everything's a million dollars.'"

"Ohlbaum says 10 percent down is unrealistic for many of his middle-class and working-class clients, even those with steady incomes and good credit. The result? They can't get the loans they need to buy in L.A."

"Dan Arguelles is a real estate agent in Manhattan Beach, California. Dan Arguelles: 'Now it's getting even tougher, that you have to state your income. It is getting a little harder to find that qualified buyer.'"

"The same thing is happening in New York, San Francisco and Washington D.C."

"Housing market economist David Lereah is with move.com. He says a couple months ago it was too easy to get a loan, now it's too hard."

"David Lereah: 'We need to be making loans to families that have the financial wherewithal to buy these homes. That's the American dream, is homeownership. And now we're keeping families out of that dream, because we've overreacted to this boom-bust cycle that we find ourselves in.'"

"Lereah says if the credit-crunch continues, it will erode consumer confidence in high-priced real estate markets and that could spread to the broader economy."