Some housing bubble news from Wall Street and Washington. The Street.com, "Hovnanian Enterprises' three-day fire sale over the weekend was billed as the 'deal of the century,' but it may just spark a pricing war among all homebuilders. Imagine having bought a home a month ago and now seeing these price cuts. The fear is that this campaign may raise Hovnanian's cancellation rate. At the end of the day, a surge in gross orders means little if cancellations also jump."

"'If a buyer is in their backlog currently, he is not going to be happy with this,' says one homebuilding analyst who follows the company."

"'With all of the negative publicity about the housing market, many homebuyers were hesitant to buy because they worried that even lower prices might be offered later,' said CEO Ara Hovnanian."

"This sentence is particularly intriguing, since Hovnanian's campaign may have just forced the entire country to the sidelines waiting for the next builder fire sale."

From Reuters. "The mortgage lending crisis deepened on Tuesday, as Impac Mortgage Holdings Inc said it will quit most lending activities. Impac said it will stop making 'Alt-A' home loans, its main business, citing 'market disruptions and illiquidity.' Such loans often go to people who cannot document income or assets."

"'Given the severe dislocation of the marketplace, which included unprecedented margin calls, we are left with no other alternative but to downsize our company to better operate and navigate through this difficult and unrelenting environment,' CEOJoseph Tomkinson said. He called the credit crisis was the worst in his 25 years in the business."

"'We cannot assure you that we will continue to operate as a going concern,' it said in its quarterly report."

The Associated Press. "Subprime mortgage lender Accredited Home Lenders Holding Co. said Tuesday it swung to a loss in the quarter ending March 31 almost entirely due losses on the sale of mortgages in the secondary market."

"Accredited reported a loss of $260.2 million for the quarter ending March 31. Accredited also reserved $25.3 million to pay for defaulted loans in the quarter, up from $16.5 million reserved for losses during the same period last year."

The Kansas City Star. "NovaStar Financial lost about a fifth of its value Monday after deciding to stop paying dividends to investors. The Kansas City-based subprime mortgage lender said its inability to pay the dividend would cost the company its status as a real estate investment trust. The action also could lead to its delisting by the New York Stock Exchange."

"The company has gotten out of the retail and wholesale lending business and is now confining itself to managing its investment portfolio and servicing existing loans."

"'We continue to take steps to preserve liquidity, mitigate risks and manage our portfolio in the midst of a difficult environment for the mortgage industry and capital markets,' Scott Hartman, NovaStar’s CEO said. 'Clearly, we did not anticipate the drop in market value or the level of demands on liquidity caused by the market turmoil this summer.'"

"Lehman Brothers Holdings Inc. posted a decline in quarterly earnings on Tuesday as the U.S. investment bank wrote down mortgage and leveraged loan assets. Lehman said it wrote down some $700 million of residential mortgage positions and loan commitments."

"In recent weeks, Lehman has said it is cutting more than 2,000 jobs as it scales back its mortgage lending efforts globally, in a sign that the investment bank does not anticipate the subprime mortgage market returning to its recent peaks anytime soon."

The LA Times. "Mortgage woes dealt a double whammy to the securities industry Monday as online broker E-Trade Financial Corp. slashed its 2007 profit forecast, citing losses on home-equity loans, and Merrill Lynch & Co. said it was cutting jobs at its sub-prime lending operation."

"The disclosures show how the New York-based financial firms miscalculated in trying to benefit from home loans, a sector outside the companies' core businesses."

"E-Trade said it would add $245 million to its accounting allowance for loan losses in the second half of the year. It also might be forced to write off as much as $100 million in its securities portfolio, largely because of troubled bonds backed by home-equity loans."

"Merrill became the latest investment bank to pare its sub-prime operation when it said it was cutting an undisclosed number of jobs. The cutback is further evidence that Wall Street's mad dash to buy sub-prime lenders in recent years has backfired badly, analysts said."

"Merrill bought First Franklin Financial Corp. and a companion loan-servicing operation for $1.3 billion in December. The servicing unit is worth less than $300 million and First Franklin itself is 'essentially worthless' -- meaning Merrill overpaid by more than $1 billion, said Matthew Howlett, a mortgage-industry analyst."

"'That is a textbook business-school study of a company overpaying for something at the top of the market,' Howlett said."

"The British government is scrambling to try to contain a run on the country's fifth-largest mortgage lender amid fears that a sustained panic could damage the national economy.

" "'People can continue to take their money out of the Northern Rock bank, but if they choose to leave their money in the bank, it will be guaranteed safe and secure,' treasury chief Alistair Darling said at a Downing Street news conference."

"Even as Darling spoke, customers lined up at bank branches around Britain to withdraw all or some deposit money. Spooked consumers have removed £2 billion since early Friday."

"The surprise of Northern Rock PLC's plight and the speed with which problems surfaced have raised questions about how the potential impact of the collapse of the U.S. subprime-mortgage market on Britain was so underrated."

From Bloomberg. "A residential real estate slump in Spain, where prices have almost tripled since 1997, is 'unthinkable,' the top economic adviser of Prime Minister Jose Luis Rodriguez Zapatero said."

"The solvency of the banking system and of real estate developers, as well as the unmet demand for new homes, will prevent any meaningful price erosion, David Taguas, head of the prime minister's economic research unit, said in an interview yesterday at his office at the presidential palace in Madrid."

"'To talk about severe adjustments or a meltdown in prices is ridiculous,' Taguas said in response to reports pointing to an end of the Spanish real estate boom. 'That sort of crisis is unthinkable.'"

"A run on mortgage lenders such as Newcastle, U.K.-based Northern Rock Plc or funding difficulties like those at Countrywide Financial Corp. in the U.S. is 'unthinkable' in Spain, Taguas said. Such a situation 'is completely out of the question' in Spain, Taguas said."

"The fallout from the U.S. housing market has pushed up the money markets rates that determine mortgage payments. More than 90 percent of Spanish mortgages are variable-rate loans linked to market rates."

"'Spain is like the U.S. on speed when it comes to the housing market,' Diana Choyleva, an economist at Lombard Street Research in London, said. 'It's highly likely that there will be falls in nominal prices.'"

"For now, the biggest threat to the Spanish housing market comes from excess supply. About 700,000 new housing units will go on sale this year, 300,000 more than projected demand, says Fernando Rodriguez de Acuna, president of a real estate research firm in Madrid."

"Central banks' injections of cash into money markets have merely served to stabilise market rates and should not be seen as bailing out speculators, European Central Bank Governing Council member Christian Noyer said on Tuesday."

"'Excessive risks were taken and losses will have to be accepted. It is important that monetary and financial authorities take no action that would prevent this process from running its course, let alone be seen to be condoning past or future excesses,' he said."

The News Journal. "Alan Greenspan, former chairman of the Federal Reserve, did not end the 2001 recession. He deferred it. The result may be a far more severe downturn than if the Federal Reserve had been more prudent with interest rates. Yet here is Greenspan in his new memoir, shifting all blame for current economic troubles, including the consequences of the housing bubble."

"Critics also say ultra-low interest rates on Greenspan's watch are partly to blame for getting the economy into its current predicament, in which a deflating housing bubble has raised the risk of a recession."

"'I'm fully aware of the fact that everyone thinks that the Federal Reserve, back when I was chairman, inflated the economy. Well, we didn't,' he told the cable channel CNBC."

"Critics argue, and have done so for years, that Greenspan was a serial bubble blower, who championed asymmetric monetary policy that slashed credit costs when U.S. markets or growth stumbled, but who was tardy in raising them when the economy was strong."

"'When there was anticipation of deflation, the Greenspan Fed was very pro-active. When there was evidence of actual inflation, or other signs of overheating, the Fed was usually a little more dismissive,' said Gregory Hess, an economics professor at Claremont McKenna College in Claremont, California."

The International Herald Tribune. "In recent interviews to plug his new memoir, Alan Greenspan has, surprise, surprise, obscured more than he has clarified. He has engaged, seemingly with verve, the question of whether he caused the housing bubble and subsequent bust by keeping interest rates too low for too long."

"One thing is sure. As long as Greenspan is defining the terms of the debate, there will never be an illuminating discussion of what went wrong to land the economy in the place it is today. The important issue now is not whether, or to what extent, low rates caused the bubble. Easy money, wherever it came from, led to lax, dubious and even fraudulent mortgage lending on a broad scale."

"The issue is what the Fed did, under Greenspan's leadership, to rein in that lending. The answer is nothing."

"To the contrary, putting a stop to bad lending practices is precisely what the Federal Reserve has the power and obligation to do. Greenspan was not inclined to use that power."

"It's not important how Greenspan sizes up his tenure at the Fed. What's important is that Congress learn the right lessons from the bubble and the bust."

From MarketWatch. "The number of foreclosure filings has more than doubled in the past year, according to a monthly report released Tuesday by RealtyTrac. Nearly a quarter of a million foreclosure filings were reported in August, up 115% from a year ago and up 36% from July."

"'The jump in foreclosure filings this month might be the beginning of the next wave of increased foreclosure activity, as a large number of subprime adjustable-rate loans are beginning to reset,' said CEO James Saccacio."

From CNN Money. "If Federal Reserve Chairman Ben Bernanke announces a 0.25 percent drop in the Fed fund rate Tuesday afternoon, the impact on housing may be very slight."

"According to Richard DeKaser, chief economist for National City Corp., a quarter point drop has already been priced into the market for Treasury bills and other instruments tied to mortgage rates. Only a half point rise would have a strong impact on mortgage rates and, by extension, housing markets."

"Mark Zandi, chief economist for Moody's Economy.com, said a cut should boost consumer confidence but the 'mortgage financing plumbing is broken right now. Lower rates will not work the same magic as they did in the past.'"

"According to Keith Gumbinger, a VP at a mortgage industry publisher, the issue right now isn't the price of money, but the perception of creditworthiness and a broken trust between buyers and sellers of debt."

"In addition, home prices in many parts of the country remain out of reach for average Americans. That has led to slow sales and lengthening inventories of houses on the market. Also adding to listings is a flood of new foreclosures hitting the market."

"It didn't help market confidence that venerated ex-Fed head Alan Greenspan came out and opined on the possibility of double-digit housing price declines, according to economist Dean Baker."

"'That has to be very worrisome for anyone lending into these markets,' said Baker. 'Lowering the rate [a quarter point] can't have too much impact.'"