Some housing bubble news from Wall Street and Washington. USA Today, "At the end of July, Reeves Williams, a home builder in the South, began offering $20,000 in incentives or cash assistance. In the first week, 22 buyers had signed contracts for new homes. Then the mortgage market fell into a tailspin. 'We lost 17 of them. It was a huge hit,' says Martha Fondren, VP of sales. 'It was a credit issue. They did not have horrible credit. But they didn't have the credit scores to get (a loan), and six months ago they would have.'"

"'Based on activity since early August, our experience is worse' than the past two corrections, Robert Toll, CEO of Toll Bros. told investors at a recent Credit Suisse (CS) conference. 'Who can't be concerned, with what we're looking at right now?' Toll says."

"KB Home said its cancellation rate jumped to 58% for its third fiscal quarter, which ended in August. 'There was a significant deterioration in the housing market, and this accelerated dramatically toward the end of the quarter,' said Jeffrey Mezger, CEO of KB Home. The number of buyers touring model homes and signing contracts hit 'the lowest levels of the current housing downturn.'"

"Half of Ryland's buyers backed out of their contracts in the most recent quarter, says Gordon Milne, CFO. 'There is definitely a lot of discounting going on in some cities,' Milne says, adding that many builders are offering 5% to 20% in incentives and price cuts, depending on the community."

"'It's hand-to-hand combat out in the field,' Milne says. 'We look at the competition down the street, what they're doing, and we've got to match it.'"

"Stuart Miller, CEO of Miami-based Lennar, says he thinks some builders' price cuts have been 'unrealistic, maybe even ridiculous.' Lennar reported the worst quarterly financial results in the company's history and a surge in cancellation rates."

The New York Times. "Javier Miglin may walk away from an $80,000 down payment on a condominium with water views in Miami. Randal Mills may give up a $130,000 deposit on a 15th floor condo on the Strip in Las Vegas."

"Whether buyers like Mr. Miglin and Mr. Mills close on their condos will be a crucial indicator for Corus Bankshares. Many condo projects that started during the real estate boom are just being completed, and developers must begin repaying construction loans taken out before the market turned sour. If buyers do not close, and developers struggle, lenders like Corus may be left holding the bag."

"'We’re at the riskiest point of the condo lending cycle as these projects are being completed,' bank analyst Jefferson L. Harralson said. 'In the coming weeks and months, we’re going to find out what the demand for these condos really is.'"

"Then there are smaller markets like San Diego, where developers are also struggling to sell units. Corus helped finance 11 condo projects there. Downtown San Diego is scheduled to have 3,000 units completed by 2008."

"Among the projects is the Icon, where Jeanette Graham bought a one-bedroom apartment last year for $374,000. She said that her building sold 80 percent of its apartments. But she said that the building is now offering even better incentives."

"Still, she questions whether there will be any takers, especially since her building feels empty. 'I can go a whole week without seeing a neighbor,' Ms. Graham said."

From Bloomberg. "Thornburg Mortgage Inc., the Santa Fe, New Mexico-based mortgage provider, lost $1.1 billion selling bonds backed by adjustable-rate home loans as rising defaults eroded demand for the securities."

"Thornburg, which has sold $22 billion of 'high quality' adjustable-rate mortgages since Aug. 10, concentrates on so- called jumbo loans, which exceed the $417,000 limit that government-chartered Fannie Mae and Freddie Mac can buy."

"'The global dislocation of the mortgage finance and credit markets this past summer has had a greater impact on our balance sheet than we initially estimated,' Larry Goldstone, Thornburg's president and chief operating officer, said."

The Associated Press. "Thornburg Mortgage will also take a $286 million writedown on the value of its portfolio for the quarter, more than the $262 million it initially planned on writing down."

"The company will report a $16 million loss on loans funded during the third quarter, due to fundings made in September on loans where the interest rate was locked before August."

The Street.com. "'Despite the greater than previously reported losses, we believe we have adequate liquidity to support our current borrowings portfolio and excess capital to continue to fund new loans and to opportunistically purchase and finance other high-quality mortgage assets, provided market conditions do not deteriorate further,' said Thornburg COO Goldstone."

"The expanded losses are primarily due 'to the receipt of actual sale price documentation for asset liquidations conducted by third-party financing counterparties as opposed to those sales conducted by the company,' Thornburg said."

"Ellington Management Group LLC, the Old Greenwich, Connecticut-based hedge-fund firm that focuses on mortgage securities, suspended client redemptions from two funds because it's too hard to value their assets."

"Setting asset values wouldn't be 'simultaneously fair both to investors redeeming from these funds and to investors remaining in these funds,' CEO Michael Vranos and Vice Chairman Richard Brounstein wrote."

"The letter said 'enormously wide spreads have developed' between the asking and selling prices for some subprime-backed bonds."

From MarketWatch. "Banks should strengthen underwriting standards on loans including those that are sold to third parties, the Comptroller of the Currency said in a speech Monday."

"'Bank underwriting standards for these products, in many cases, moved too far away from what they would have been if the bank had held those loans on its own books,' Dugan said."

"Dugan said in prepared remarks that banks 'need to strengthen their underwriting standards so that they move back towards the fundamental principle of maintaining a reasonable expectation that loans will be repaid, even if the loans are to be sold to third parties.'"

"However, Dugan also noted that despite the current credit market turmoil, federally regulated banks have 'weathered this period remarkably well' so far. The OCC supervises about a quarter of the nation's banks."

"On the subject of credit rating agencies, which have been accused of failing to give investors adequate warning of the risks associated with mortgage-backed securities, Dugan said that 'legitimate questions have been raised about just how well they assessed and understood the risks' of mortgage securities made to borrowers with shaky credit."

"Fitch Ratings cut ratings on two Asian collateralized debt obligations linked to company debt, indicating an increased risk of default, the company said today."

"Investors are shunning CDOs and other credit assets on concerns that losses on U.S. home loans to buyers with poor credit records are spreading to other credit markets. Sales of CDOs, once the fastest-growing part of the debt market, fell to $16 billion worldwide during September, the lowest in 21 months, according to Morgan Stanley."

"One in five managers of CDOs is likely to be forced to cut costs or go out of business as investors avoid the securities following losses on subprime debt, Fitch Ratings said."

From Reuters. "The U.S. subprime housing crisis will not peak until 2009, rating agency Standard and Poor's said on Tuesday, adding it had underestimated the extent of fraud in the industry."

"'We underestimated the extent to which fraud was occurring in the industry,' said David Wyss, S&P's chief economist. 'It looks, based on some surveys that had been done, the extent of frauds increased sharply in 2006.'"

"'We think in the United States the housing market is not going to bottom until winter. We think the losses in these sectors won't really hit their peak until 2009,' Wyss said. 'We are not halfway through with this crisis yet.'"

National Mortgage News News. "The secondary market for delinquent second liens isn't getting any better these days -- unless you're a buyer. Traders tell us that seconds that were part of 80/20 loan structures are selling for 10 to 15 cents on the dollar. Unsecured seconds are fetching just one to two cents on the dollar."

"'Debt collection agencies are the ones bidding on this stuff,' said one investor."