Some housing bubble news from Wall Street and Washington. CNN Money, "The meltdown in the mortgage market in August dried up the supply of buyers for homeowners looking to sell their homes, as an industry group report showed the lowest level of homes under contract on record. The National Association of Realtors' pending home sales index fell to a record low of 85.5 from an upwardly revised 91.4 reading in July."

"That broke the previous low of 89.8 in September 2001. The index fell 21.5 percent from year-earlier levels, the biggest 12-month drop ever recorded, as the one-month decline of 6.5 percent was third biggest drop on record, trailing only July of this year and the September 2001 period. The trade group started the index in 2001."

"'Fewer contracts were being written because of mortgage availability issues, and a separate internal survey of our members shows more than 10 percent of sales contracts fell through at the last moment in August, primarily the result of canceled loan commitments, said Lawrence Yun, NAR senior economist. 'The volume of activity we’re seeing today is below sustainable market fundamentals because some creditworthy people are trying to buy homes but can’t because of the credit crunch.'"

"'The impact was greater in high-cost markets that are more dependent on jumbo mortgages. In some areas, as much as 30 percent of signed contracts were falling through in August when the credit crunch problem peaked,' Yun said. 'The problem has since become less severe, though jumbo loan rates are still higher than they would be under normal conditions. Therefore, sales activity in late fall will better reflect market fundamentals.'"

"The PHSI in the West was down 27.1 percent below a year ago. In the Midwest, the index fell 18.0 percent lower than August 2006. The index in the Northeast was 18.3 percent below a year ago. In the South, the index dropped 21.3 percent below August 2006."

From MarketWatch. "'This is still absolutely awful, confirming that the existing homes market is now in freefall,' wrote Ian Shepherdson, chief U.S. economist for High Frequency Economics. 'This is consistent with existing-home sales falling to just 5 million or so," down 10% from the latest level and 30% from the peak.'"

From Reuters. "Westpac Banking, the fourth-biggest Australian bank, will buy the brand and distribution business of Rams Home Loans Group, swooping onto assets of the lender, which struggled to refinance its debt after the U.S. subprime mortgage crisis."

"'Rams looks like a business in run-down, it doesn't have much of a future at all,' said Rob Patterson, managing director of Argo Investments. 'I'm surprised they couldn't cut a better deal elsewhere, but it's symptomatic of the times in credit markets.'"

The Australian. "The sad saga of RAMS can partly be blamed on the global credit markets turmoil, which hit the market soon after it floated. Rising defaults among sub-prime lenders in the US turned investors away from residential-backed mortgage securities, the key source of cheap funding for non-bank players."

"But the brutal reality is RAMS was always a volatile business, regardless of the credit markets. It funds long-term mortgages with short-term funding and is not required to retain capital."

"For RAMS shareholders, unless a white knight comes along and makes a better offer, they are left with a $14.5 billion loan book, $6.1 billion of which needs refinancing by next February, and $138 million of corporate debt."

"Quite simply, once shareholders vote on the deal, RAMS will be nothing more than a closed mortgage book that is in run-off mode, with $138 million of corporate debt. This is not a good outcome for RAMS shareholders but it is possibly the company's only option, given current conditions in credit markets."

"Shareholders have little choice but to accept the offer, because the company is unable to confirm with any certainty that it can fund the business. And if it can't do that, the business is worth virtually nothing."

"It's now clear that RAMS Home Loans Group's business model was built on quicksand rather than solid ground, but there has been no real sense of the gravity of the company's position in its recent warnings to the ASX. Investors might now give consideration as to whether they have grounds for a class action."

"RAMS was listed only nine weeks ago, after raising $695 million from the public. Founder John Kinghorn retained a 20 per cent stake, so RAMS initially had a market capitalisation of $880 million."

"On August 14, less than three weeks after listing, RAMS issued a warning that it was being affected by the drying up of liquidity on global debt markets, due to the sub-prime mortgage crisis in the US, but at that stage was continuing to "successfully place" its short-term debt in the XCP market in the US.

From Bloomberg. "Spanish property loan delinquencies may increase as much as 15-fold by the end of 2008 as interest rates rise, Moody's Investors Service said in a report."

"Loan-payment arrears by developers and builders may reach 5.5 percent of total property loans from the current 0.37 percent, according to the New York-based ratings company. The increase would mark a 'soft landing' for Spain's 12-year property boom, Moody's said in a report."

"Spanish builders constructed 750,000 houses and apartments last year, more than France and Germany combined, while annual demand runs about 60 percent of that, according to the Finance Ministry."

"Moody's said a 'hard landing,' in which loan defaults by developers and builders exceeds 5.5 percent and house prices plunge 20 percent, is a 'remote' possibility."

"Policymakers in Europe and the U.S. have criticized ratings firms for their response to the credit market slump earlier this year."

"'We have no concern at all about the strength of the Spanish financial system,' Deputy Finance Minister David Vegara said at a press conference today in response to the report. 'I'm not sure what it contributes talking in abstracts,' Vegara said about today's Moody's report. 'Ratings agencies should take particular care with their communications after what happened in August.'"

"The prices of existing houses and apartments in Madrid fell to 4,277 euros ($6,796) a square meter in the three months to the end of September, a 0.9 percent decline from the previous quarter, according to a) property Web site. In Barcelona, the average asking price fell 0.5 percent to 4,802 euros, said the Web site."

"Japan's financial regulator is investigating the exposure of the country's financial firms to the U.S. subprime mortgage market to gauge the risks facing the world's second-largest economy."

"'We've been checking to see if the risk has spread and to what extent firms are exposed to securitised products related to the subprime market,' said Japan's financial services minister, Yoshimi Watanabe, at a regular news conference. 'If we do find any problem, we plan to deal with it quickly,' he said."

"'We have to see whether the U.S. economy achieves a soft landing,' Japanese Economics Minister Hiroko Ota told a separate news conference."

"Mitsubishi UFJ Financial Group Inc, Japan's largest bank, said last month its investments in subprime-related products were a potential risk to earnings. MUFG exposure to subprime-related investments was 280 billion yen ($2.4 billion) as of July, the latest figures it has made available showed."

"In August, the bank said it wrote down the value of some investments related to subprime products by 5 billion yen."

"U.S. insurer Prudential Financial Inc said its retirement unit had filed suit against units of State Street Corp seeking restitution for funds sold by State Street that suffered heavy losses."

"The insurer said in a filing with the U.S. Securities and Exchange Commission that results for the latest quarter would include a pretax charge of about $80 million to reflect payments to clients who suffered losses from the funds."

"Without notifying Prudential or its retirement plan participants, State Street made 'undisclosed, highly-leveraged investments in mortgage-related financial instruments,' Prudential charged in its suit."

"'The recent market conditions and lack of liquidity were unprecedented, said State Street spokeswoman Arlene Roberts said in a statement. 'An unfortunate result ... is that some funds lost value.'"

"In its suit, Prudential said State Street had invested in a 'relatively new' synthetic index whose returns were linked to 20 subprime U.S. mortgage pools."

"Former Federal Reserve Chairman Alan Greenspan said there will be 'some rethinking' of collateralized debt obligations after demand for them helped fuel a bubble in the U.S. subprime mortgage market."

"'People always say it's the subprime market that created this crisis,' Greenspan told investors. 'It's the subprime asset-backed market' which did, he said. 'As a consequence of that, there's going to be some rethinking about collateralized debt obligations.'"

"'The Wall Street firms were under real pressure to supply asset-backed securities, and the Wall Street firms were pressing the lenders to give them more raw material,' Greenspan said today. 'Credit standards just went straight down, and applications for subprime mortgages soared. The consequences of that are evident.'"

"The market for CDOs is already shrinking. Worldwide issuance of CDOs fell to $17.3 billion in September, about a quarter of the monthly average for the past 12 months, according to data from JPMorgan Chase."

"'The pricing which in too many cases has been, by some model derivation, four times removed from actual market prices, just doesn't work,' Greenspan said."

The Associated Press. "Former Federal Reserve chairman Alan Greenspan defended the U.S. subprime mortgage market, arguing the repackaging and sale to investors of risky home loans, not the loans themselves, was to blame for the current global credit crisis."

"'We are not through with this yet,' he added, suggesting there could still be what he termed an 'Act II,' in which falling house prices feed into slower consumer spending."

"Greenspan also implicitly criticized the role of ratings agencies in the crisis. 'The problem was that people took that as a triple-A because ratings agencies said so,' he said. Yet when they tried to sell the products they ran into difficulties, which shook confidence."

"'What we saw was a 180 degree swing from euphoria to fear and what we've learned over the generations is that fear is a very formidable challenge,' Greenspan said."

"Greenspan defended the role of central banks and market regulators, claiming they do not have the resources to deal with criminal or illegal acts."

"'We are not skilled enough in these areas and we shouldn't be expected to,' he said. 'It should be with the states' attorney general and, frankly, it should be beefed up a considerable amount from where it is at this stage,' he said."