Some housing bubble news from Wall Street and Washington. Bloomberg, "Defaults by U.S. homeowners with private mortgage insurance jumped by 22 percent last month after house prices fell the most in at least six years, an industry report said. The number of insured borrowers more than 60 days late on their payments climbed to 54,699 in September from 44,791 a year earlier, according to the Washington-based Mortgage Insurance Companies of America."

"'The speed and the depth of the deterioration we saw in the third quarter, and in particular the month of September, was greater than we had expected,' said PMI CEO Stephen Smith in a conference call after reporting a net loss of $86.8 million."

"Total U.S. losses, including money set aside for future claims, increased fivefold to $348.3 million in the third quarter, the Walnut Creek, California-based insurer said"

"'Things are going from bad to worse,' said Ajay Rajadhyaksha, head of fixed-income strategy in New York at Barclays Capital Inc. 'Overleveraged borrowers are meeting falling home prices.'"

The Associated Press. "Mitsubishi UFJ Financial Group Inc. on Wednesday slashed the outlook for its net profit by 25 percent for the current fiscal year due to subprime-related losses and sluggish domestic lending business."

"The banking group said estimated losses on investments, including some related to subprime loans, stood around 20 billion yen ($173.91 million) at the end of last month. Its write-down of investments with subprime loan components fiscal first half will be about 5.0 billion yen ($43.48 million), it said."

From MarketWatch. "The Bank of Japan trimmed Wednesday its forecast for the Asian nation's economic growth this year and slashed inflation estimates to zero, dashing hopes that Japan had won its long bout with deflation and raising doubts that its longest expansion since World War II is running out of steam."

"'The environment overseas has changed, and uncertainty over the global economy persists,' media reports cited Bank of Japan Governor Toshihiko Fukui as saying at a Tokyo news conference."

"Fukui also said global growth could be crimped by the ongoing problems gripping the U.S. mortgage market."

The Sydney Morning Herald. "Borrowers in NSW marginal electorates are defaulting on 'dramatically' more loans than they did last year, indicating a rising tide of financial stress, credit check figures show."

"The biggest increases in borrowers not being able to meet credit card, personal loan and mortgage payments are in drought-affected rural regions and the 'mortgage belt' in Sydney's west."

"In the federal seat of Calare in the central west, there were 77 per cent more defaults than last year, the figures, released by credit check company Veda Advantage yesterday, show."

"'This study demonstrates that a significant number of people living in regional NSW are struggling to repay the credit they owe - a rise in defaults of almost 60 per cent over the previous year indicates the situation is getting desperate for some,' said general manager Erica Hughes."

"Nick Collins, an independent London real estate broker who's had record profits every year since 2003, took a hit in September, and that may be bad news for a U.K. economy built on a housing bubble."

"Five of his 50 buyers pulled out of purchases, spooked by a run on mortgage lender Northern Rock Plc that left it 2 billion pounds ($4.1 billion) poorer."

"'It's undermined people's confidence,' says Collins, who sells homes worth as much as 5 million pounds. 'The market's not as frothy and competitive as it was.'"

"Now, with mortgage lending cooling and house prices falling for the first time this year in September, the economy may be in the early stages of a slowdown. 'U.K. house prices are significantly overvalued and extremely vulnerable to a correction,' said Danny Gabay, a former Bank of England economist."

"Consumers have spent some of these gains and loans on goods such as new kitchens and cars they otherwise couldn't afford, said Alan Clarke, a London-based economist for BNP Paribas SA, France's biggest bank. 'The only thing that has been supporting consumer spending growth is wealth gains from house price inflation,' Clarke says. 'This is about to disappear.'"

"Gabay says so-called buy-to-let properties, which investors acquire for rental income, are more vulnerable to a fall in prices. The value of new buy-to-let mortgages soared more than 12-fold from 1999 to 2006 to 38.4 billion pounds, or 11 percent of new property loans, according to the Council of Mortgage Lenders.'

From Reuters. "Equity Residential, one of the largest U.S. apartment owners, on Tuesday reported weaker quarterly funds from operations...fell partly because of competition from single-family homes and condominiums for rent."

"Some markets, such as Florida, Phoenix and Las Vegas, have seen many condominiums or single-family homes appear on the market as rentals, competing with traditional apartments."

The Consumerist. "Foreclosure tracking firm RealtyTrac has been delivering lots of bad news this year, not least of which is some sobering numbers on Real Estate Owned properties or REOs."

"And there have been a lot of them. 255,129, according to RealtyTrac's records."

"Just how many homes are we talking about? 255,129 is more housing units than the entire city of New Orleans. 255,129 is enough housing to hold about 790,900 people, according to the average family size reported in the 2000 U.S. Census."

"If those 790,900 people formed a city, 'Bank Repossessionville' would be the 13th largest city in the U.S. Right in between Jacksonville, Florida and Indianapolis, Indiana."

"The 13,674 houses owned by just one lender, Countrywide, are valued at 2,867,767,788."

The Star Bulletin. "Three months ago, Central Pacific Financial Corp. assured investors it had no exposure to the subprime lending market. But what a difference a quarter makes."

"The parent of Hawaii’s fourth-largest bank, Central Pacific Bank, said today that third-quarter net income plunged 55.8 percent after it took a $21.2 million provision for loan and lease losses due to a rapid downturn in California residential construction."

"'What happened is the national homebuilders took the strategy of just unloading inventory and they discounted it significantly from 10 to 30 percent, and many of our projects were located next to projects that national homebuilders have,' said Clint Arnoldus, president and chief executive of Central Pacific. 'All that happened in a very short time.'"

"Arnoldus said he had never seen a downturn occur so quickly. 'In this case, it’s a rifle shot right into the housing industry because the other economic indicators in California are still relatively strong. What happened in this case is the market got overheated by the subprime mortgages that were created, and that came to a grinding halt. Then the national homebuilders dumped inventory,' he said."

"Home prices have further to drop as builders become increasingly concerned about turning over their inventory, former Federal Reserve Chairman Alan Greenspan said."

"'We've got this huge overhang of newly constructed homes ... which are vacant and deteriorating,' Greenspan told a financial services trade association. 'You cannot keep a very large inventory of single homes for sale because their value declines. There is very considerable pressure for home builders to unload these on the market and they're starting to do that.'"

"He said that housing prices will be key to whether the economy begins to contract and will be more of an influence than the turmoil in the credit markets."

"'It's going to depend more on the issue of prices of homes than it will be on the resolution of what has been a fairly significant credit crunch,' Greenspan said. 'If we didn't have the house price problem, we'd be well along on the way of getting out from under this.'"

"The former Fed chief indicated there was more pain coming, even after home prices in 10 major U.S cities showed a 5 percent year-over-year drop in single-family homes in August."

"'There is very little evidence that we're making much progress because sales were falling almost as rapidly as new construction,' Greenspan said."

"A Federal Reserve interest rate cut this week won't be enough to save the reeling housing sector, overwhelmed by unsold homes. 'We think the more significant problem in the housing sector is the inventory. It's not just the affordability of the credit, it's even the access to the credit, which is a question today,' says Nicolas Retsinas, director of the joint center for housing studies at Harvard University."

"Order cancellations are escalating as lenders crack down after being burned by mounting defaults and foreclosures. 'If mortgage rates go down, they still have to make it through the hurdle of credit quality,' said Gregory Miller, chief economist at SunTrust Banks Inc."

"'Banks have been very scorched, very burned by the quality of, in particular, subprime ARMs," or adjustable-rate mortgages made to borrowers with weak credit histories. "You could end up at that market-clearing, inventory-reducing price, but not be able to get financing. This one's getting rough,' he said."

"The interest rate cut Wall Street believes will buffer the economy from housing market woes is unlikely to boost hard-hit banks and homebuilders much in the near term, analysts say."

"'The problems in the housing market, the problems in the credit markets are not easily solved by the Fed cutting rates,' said Steve East, chief economist for investment bank Friedman Billings, Ramsey & Co."

"Struggling homebuilders, such as D.R. Horton Inc., Lennar Corp. and Pulte Homes Inc., are faced with tightened lending standards and severely limited demand. Many would-be buyers are unable to qualify for loan approvals, even if rates move lower."

"Lower interest rates are 'certainly not the panacea' for getting the housing market back on track, said UBS homebuilding analyst David Goldberg."

"Jefferson Harralson, a banking analyst...who follows banks such as Bank of America Corp. and Wachovia Corp., said an acceleration in losses from defaults .seems to be a given, whether or not a rate cut occurs.."

"He says home equity lines of credit will be less likely to default if rates are lower. But that's hardly a revenue cure for banks in an environment in which housing prices continue to fall and foreclosures continue to rise."

"'The home equity business isn't going to be a growth business,' Harralson said."

The Washington Post. "Remember all those stories about how the nose dive in financial markets was the first big test for Federal Reserve Chairman Ben Bernanke, the academic economist who was still developing his feel for the interplay between the central bank and Wall Street?"

"Well, it turns out that was only a midterm. The final exam begins today, when Bernanke will either show that he is capable of standing up to the insatiable demands of Wall Street, or that he is so spooked by the prospect of being blamed (unfairly) for triggering a financial meltdown that he puts the short-term interests of big banks and investment houses before the long-term interests of the global economy."

"Even if you believe, as some of us do, that the bursting of the housing and credit bubbles will eventually drag the economy into recession, there is little evidence that this is happening yet. And when the economy does begin to hit the wall, there is little the Fed will be able to do, or should do, to prevent it: It is part of the economy's natural self-correcting process."

"But what a rate cut surely would do is to encourage investors and bankers in their belief that the Fed is so desperate to avoid a credit crunch that it is willing to reinflate the bubbles and keep the party going anyway it can."