Some housing bubble news from Wall Street and Washington. The New York Times. "Deutsche Bank finally put a number on its losses from the home-lending crisis, saying today that it expected to write down $3.1 billion in loans and mortgage-backed assets. Early on, Deutsche Bank appeared to be a rare beneficiary of the subprime mess. It had profited by selling mortgage loans with derivative contracts that appreciated as the American housing market slumped."

"The first inkling of trouble came last month, when the bank’s CEO, Josef Ackermann, appeared on German television, acknowledging that the country’s banks had erred by expanding pell-mell into financial products that later proved risky."

"Deutsche Bank said today that it would write down 700 million euros in the value of its leveraged loan portfolio and 1.5 billion euros on the value of assets, including mortgage-backed securities."

From Newsday. "Federal prosecutors and the FBI have opened an investigation into whether criminal misconduct was involved in the collapse of Melville-based American Home Mortgage, according to several sources familiar with the situation."

"The investigation...has been going on for several weeks, is looking into whether various federal criminal statutes have been violated that resulted in the company's bankruptcy, the sources said. Among the statutes are conspiracy, securities, mail and wire fraud, and money laundering, the sources said."

"American Home Mortgage, once one of the nation's 10 largest mortgage lenders, collapsed at the beginning of August, filing for bankruptcy on Aug. 6, and laying off most of its 7,000 employees, including 1,400 on Long Island."

"Stressing that the investigation is just in its initial stages, and that no charges have been brought, the sources said investigators are beginning to put together a picture of how American Home Mortgage operated, whether all documentation behind mortgages was legitimate, and whether the company began to cut corners as the mortgage market began to collapse."

"Given the hundreds of millions of dollars lost in the company's collapse, a conviction for fraud could led to prison sentences of 10 years or more under federal sentencing guidelines."

From Inman News. "Mortgage and subprime lenders have announced nearly 70,000 layoffs in the first three quarters of 2007, according to outplacement consulting firm Challenger, Gray & Christmas Inc."

"'The heaviest job cutting has occurred over the last two months as the bottom suddenly fell out from the mortgage and subprime markets,' said CEO John Challenger. 'The dominos are likely to keep toppling as home values fall and foreclosures continue to climb.'"

"The 51,851 layoffs in mortgage lending reported in August and September represented 82 percent of announced job cuts in the financial industry during the period."

Investors Business Daily. "The credit crunch slammed housing activity as pending sales of existing homes fell a surprising 6.5% in August to a record low, the National Association of Realtors said Tuesday."

"That latest decline suggests sales of previously owned homes will keep dropping from August's five-year low. Tight lending standards and a lack of affordability make it hard to sell homes, analysts said. 'We're not seeing a bottom in home sales on the immediate horizon,' said Scott Brown, chief economist at Raymond James."

"A lack of affordability will make it difficult to whittle away a 10-month inventory of unsold dwellings, an 18-year high."

"'I think you're going to continue to see worse numbers,' said Bob Moulton, president of the Americana Mortgage Group. 'Buyers are still expecting prices to come down, and they're going to wait until they think they've bottomed out.'"

From Bloomberg. "'The existing homes market is now in freefall,' said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd. 'The downside from here is still substantial.'"

"So far, the Fed's half-point rate cut has failed to lower mortgage rates and boost demand. Average 30- year, fixed-rate mortgage rates ended last week at 6.42 percent, compared with an average 6.3 percent the prior week, according to Freddie Mac."

"Buyers have been further constrained by the tighter lending standards and the shutdown of mortgage lenders such as American Home Mortgage Investment Corp. in early August that closed off access to credit."

"'Fewer contracts were being written because of mortgage- availability issues,' said Lawrence Yun, a senior economist at the real estate agents group. 'More than 10 percent of sales contracts fell through at the last moment in August, primarily the result of canceled loan commitments' from lenders."

"'There is still no bottom in sight,' said Joshua Shapiro, chief U.S. economist at a New York forecasting firm. 'Sales will continue to fall until there is a greater price capitulation by sellers. It still appears that we have not reached market-clearing prices to reduce the inventories of unsold existing homes.'"

From Reuters. "The audacious rise in the Dow industrials to a record will do little to prevent the millions of new 'For Sale' signs likely to dot U.S. lawns soon."

"'I don't think the worst is over,' said Robert Arnott, chairman of Research Affiliates LLC, an investment management firm. 'We are coming off the greatest lending bubble -- not housing bubble! -- in U.S. history. We will feel its impact for a very long time.'"

"Millions with subprime mortgages, which go to borrowers with checkered credit histories, are faced with negative equity in their homes that could make it increasingly unlikely they will qualify for new mortgages in an environment of tighter lending standards."

"At current home prices, about $693 billion in ARMs are 'already under water,' according to Stephanie Pomboy, financial economist at MacroMavens."

"That's frightening news for banks that already have absorbed losses on their balance sheets due to delinquent subprime borrowers. The losses so far amount to about 10 percent of the forecast of $100 billion in losses."

"'The disturbing number here isn't 10 percent ... but the $100 billion,' Pomboy said."

"With nearly $700 billion in ARMs in negative equity facing interest-rate resets, 'depending on how much lenders can ultimately recover, this implies (bank) losses will be more like $210 billion to $346 billion,' she said. 'And that's assuming the situation doesn't get worse.'"

"In July, Federal Reserve Chairman Ben Bernanke had estimated the losses at $100 billion at the most. But it appears Bernanke had underestimated those figures and their effects on the consumer."

"'With the reset wave about to gather intensity and 'For Sale' signs dotting the lawns of 5.1 million homes across the country, the credit hit parade has only just begun,' Pomboy added."

The Wall Street Journal . "For Countrywide Financial Corp., this time it's personal. At least that's what a top executive says. Having suffered a barrage of negative headlines while battling to shore up its finances and shrink its work force of 60,000 by as much as 20%, the nation's largest home-mortgage lender is launching a PR blitz aimed at repairing its reputation."

"For the demoralized employees who remain, the new campaign means wristbands with the phrase 'Protect Our House' and pep talks promising to keep 'amply' rewarding the most successful among them amid a struggle with the sharp drop in mortgage lending as defaults soar and house prices decline."

"Excerpts from executive managing director Drew Gissinger III's motivational speech to key Countrywide employees: 'Let's call it like it is, as I mentioned earlier, it's gotten to the point where our integrity is being attacked. NOW IT'S PERSONAL! The FUD campaign is now questioning our -- yours and mine -- ethics, morals, and business practices. And, WE'RE NOT GOING TO TAKE IT!'"

"'It's gotten to the point where our integrity is being attacked. NOW IT'S PERSONAL!' says the transcript of a talk made last week by Mr. Gissinger. '... And, WE'RE NOT GOING TO TAKE IT!'"

"It says that employees are expected to sign a pledge to 'demonstrate their commitment to our efforts,' and Rick Simon, a Countrywide spokesman says about 11,000 have signed. Each employee who signs up receives the Protect Our House wristband made of green rubber."

"To counter criticism that its lending practices are to blame for a surge in foreclosures, Countrywide plans to emphasize its 'mission' of helping Americans become homeowners, the transcript says. 'I want employees to look down at their wristbands and remember our fundamental mission to help customers achieve the American Dream, and to help them withstand those malicious outward attacks and to motivate them to continue on our journey with unwavering conviction,' the transcript quotes Mr. Gissinger as saying."

"The combative tone reflects the blunt-spoken style of Angelo Mozilo, Countrywide's chairman and chief executive, who helped to found the company in 1969. 'We're demonized something fierce,' Mr. Mozilo said in an interview two weeks ago."

"Mr. Gissinger sought to reassure employees about sticking with the company in the transcript: 'I've made a lot of people rich or richer who have joined me on my past crusades. Please trust the same holds true here.'"