Some housing bubble news from Wall Street and Washington. Reuters, "Washington Mutual Inc, the largest U.S. savings and loan, may set aside $500 million more than it had previously forecast for loan losses in 2007, amid what CEO Kerry Killinger on Monday called a 'near perfect storm' in U.S. housing. 'Most housing markets appear to be weakening,' Killinger said at a financial services conference. 'We would not be surprised to see declines in housing prices in many regions of the country ... for the next few quarters.'"

From Bloomberg. "'The combination of rising delinquencies, higher foreclosures, more housing inventories, increasing interest rates on many mortgages and greatly reduced availability of mortgages due to limited liquidity is creating what we call a near-perfect storm for housing,' Killinger said."

"'It now appears that housing and capital market corrections will be worse and longer lasting than even we expected,' Killinger said."

The Tampa Bay Business Journal. "Countrywide Financial Corp. said it plans to cut up to 20 percent of its workforce and shift its residential lending business into its thrift subsidiary."

"Countrywide, the nation's largest home lender, expects total mortgage market origination volumes will drop by about 25 percent in 2008, compared to 2007 levels. Reductions of workforce will occur in areas most impacted by lower origination volumes, the release said."

"'When you're born in a boom, you generally die in a bust,' Countrywide CEO Angelo Mozilo said in an interview after the company announced the cuts. 'Most of the companies that are gone have never been through a period like this.'"

"Employees remaining in the mortgage industry probably will have lower pay, including executives whose bonuses depend on profits and brokers who get paid on commission, said Bert Ely, an Alexandria, Virginia-based consultant."

"'The slowdown is deeper than a lot of people thought,' Ely said. 'I don't think there's anybody now, even the optimists, who think this will run its course by the end of the year. And this isn't something that's going to bounce back quickly.'"

"The contraction may also lead to lost jobs and income for mortgage appraisers, title-company clerks and settlement attorneys, he said. 'All kinds of people that feed off the origination activities are suffering cutbacks,' he said."

From CNN Money. "In yet another sign of pain in the troubled real estate sector, title insurers are seeing a big increase in the number of claims, according to a new report. The Wall Street Journal reported on its website Sunday that title insurers like First American Corp. are fielding a significant rise in claims, yet more evidence of the housing market's woes."

"Some title insurers also say new business has slowed - a possible sign, the Journal said, of more problems ahead."

"'If you want to know what's going on with mortgage activity, you look at title orders,' Nik Fisken, an insurance-industry analyst told the paper."

The Associated Press. "Credit rating agency Moody's Investors Service said Monday it expects the housing-market slump to last at least until 2009, likely precipitating numerous ratings downgrades at publicly traded homebuilders."

"'Our current thinking is that the downturn, currently two years in the making, will last until 2009, with any sector recovery likely to be sluggish for some time after that,' said Joseph Snider, senior credit officer at Moody's."

"'Many of these companies may see further downgrades, with multiple-notch downgrades possible for homebuilders,' Moody's said."

"Moody's said it expects builders to violate the terms of existing credit agreements as conditions on the housing market remain poor. That will lead lenders to 'tighten restrictions on credit facilities, either through taking collateral, reducing the size of the facility, or restricting borrowing base calculations,' the agency said."

The Financial Times. "The R-word is usually avoided by Wall Street's economists. It tends to be a conversation-stopper when investment bank clients are told to prepare for the worst."

"'It is like looking a client in the eye and telling them that their child is ugly,' says David Rosenberg, chief economist at Merrill Lynch. 'It is not what people want to hear.'"

"But the parameters of polite conversation have shifted following the shock decline in the employment market revealed last week. Recession is the word on everyone's lips."

"'You are talking about a $23,000bn asset class – there is nothing on the planet as big as that,' says Mr Rosenberg, who is predicting a fall in house prices nationally of up to 15 to 20 per cent."

"The job of declaring recessions, generally defined as two consecutive quarters of economic contraction, does not belong to the White House or Wall Street. That task belongs to Martin Feldstein, head of the National Bureau of Economics."

"Mr Feldstein has been blunt about his outlook. He used the word recession seven times in a recent speech to central bankers, telling them that 'a sharp decline in house prices and the related fall in home-building ... could lead to an economy-wide recession.'"

"He said the type of collapse in housebuilding recorded in recent months was 'a precursor to eight of the past 10 recessions"; there was 'a significant risk of a very serious downturn.'"

"Mr Rosenberg says it may be 'too late' for the Federal Reserve to prevent a recession by cutting interest rates aggressively this month."

"Federal Reserve Bank of Philadelphia President Charles Plosser said there is an 'underlying stability' in the U.S. economy and policy makers need not always cut interest rates in response to financial-market turmoil."

"'Disruptions in financial markets can be addressed using the tools available to the Federal Reserve without necessarily having to make a shift in the overall direction of monetary policy,' Plosser said at a conference."

"Plosser said it was not the U.S. central bank's job to protect individuals and firms from taking risks. 'The Fed does not seek to remove volatility from the financial markets or to determine the price of any particular asset; our goal is to help financial markets function in an orderly manner,' he said."

"'Policy-makers must be careful to allow the marketplace to make necessary corrections in asset prices,' he said, adding that a failure to do so would ultimately increase risks to the financial system."

The BBC News. "Leading UK and European banks may be forced to pay out as much as £70bn ($142bn) over the next 10 days as the global credit crunch continues to bite."

"As US mortgage rates have risen sharply over the past year, it has led to record levels of loan defaults and home repossessions. This crisis has spread across the Atlantic, as US sub-prime loans are often combined with other debts and then resold around the world."

"An unnamed boss of one of the UK's largest banks told the Sunday Times at the weekend that conditions in the money markets were the worst for 20 years."

The Independent. "Property and economic experts are warning that an over-supply in the housing market will cause prices to fall further in the short run, but that long-term the market will recover."

"A survey of house prices has shown that since March almost 4,000 houses have dropped in price, wiping €113 million off the value of properties."

"John McCartney, Head of Research with Lisney estate agents said yesterday: 'What we are seeing at present is the backlog of an exceptional year in terms of supply last year coupled with a reduction in demand. Of course when there is over supply, prices will come down.'"

"The experts don't believe there has been a credit squeeze but the reduction in loans being offered is simply an issue of affordability. Dermot O'Leary, chief economist with Goodbody stockbrokers, said: 'There hasn't been a criteria change in the bank's policies. It is only about what people can now afford given all the successive hikes in interest rates.'"

"The Sunday Independent has identified a number of multi-million-euro houses that have seen their values slashed in recent months, both in Dublin and other areas around the country."

"Last month, more than 700 properties dropped their price with more than 20 seeing their prices drop by more than €100,000. Also included in the 723 house price drops for August, which wiped €20 million off the value of the properties, were a number of houses and buildings over the €1 million mark."

"Many of these have seen price reductions of over 10 per cent, with a small number dropping by a staggering 25 per cent."

"Central bankers are alert to the prospect of a hit to growth from the last month's financial market upsets but are not responsible for rescuing unwary investors, top policymakers said on Monday."

"After talks at the Bank for International Settlements in Basel, central bankers vowed to keep a close eye on market developments and take action as needed."

"G10 chairman Jean-Claude Trichet, who heads the European Central Bank, pointed to past warnings about investor overconfidence on risks and said markets were now in a process of correction including bouts of volatility and overshooting."

"Central banks had taken action to ensure stability on money markets but were not responsible for rescuing the unwary."

"'It's certainly the sentiment of central bankers who are around the table that bailing out bad investors would be the worst thing to do,' he said."

"Other central bankers present at the meetings, including Mexico's Guillermo Ortiz and Chile's Vittorio Corbo, said the global economy would not escape a hit to growth but central bankers were ready to deal with the situation."

"'Fortunately the world economy is in good condition but we are aware that there will be an impact,' Corbo said. 'As central banks we are prepared to deal with (the) consequences. It could last six months, it could last a year.'"