Some housing bubble news from Wall Street and Washington. Bloomberg, "UBS AG, Europe's biggest bank, reported a third-quarter loss, ousted two top executives and announced 1,500 job cuts after writing down the value of fixed- income securities by more than 4 billion Swiss francs ($3.4 billion). UBS will report 'substantial losses' in the fixed-income, rates and currencies division of its investment bank, mostly on securities backed by U.S. subprime residential mortgages, the bank said."

"The deterioration in that market in August 'was more sudden and more severe than in recent history,' UBS said."

The Associated Press. "Citigroup Inc. estimated Monday that its third-quarter profit will drop 60 percent, as the nation's largest bank took losses of more than $3 billion after writing down securities backed by underperforming mortgages and loans tied to corporate buyouts."

"The bank also said its profit would be dampened after boosting loan loss reserves by about $2 billion."

From Marketplace. "Banking analyst Dick Bove with Punk Ziegel says the worst isn't over: Dick Bove: 'I think that Citigroup, Bank of America, JP Morgan, Wachovia, as well all the big brokers and Merrill Lynch are gonna be taking write-offs of this nature for a while.'"

The Chicago Tribune. "Allstate Corp. has about $5 billion in subprime investments in its portfolio, a stake that has been weighing on shares of the nation's No. 2 home and auto insurer and compelling its managers to spend time assuaging investor worries about a topic far removed from selling property and casualty coverage and financial products."

"During his presentation, Chief Financial Officer Dan Hale addressed what he called the 'topic du jour,' the subprime mortgage securities market."

"As of June 30, Allstate had $4.8 billion in subprime residential mortgage-backed securities. All are investment grade, and 73 percent have AAA ratings. It also has $1.2 billion in Alt-A securities. All are investment grade, and 92 percent have AAA ratings. Alt-A mortgages serve home buyers who are slightly better credit risks."

"But calming the nerves of one investor during the question-and-answer session required more than Allstate citing a Moody's report. 'I would hope that's not the only study by Moody's that you're depending on to gain comfort in your position in those securities,' the audience member said. 'I would take it that you've gotten some details from somebody a little bit more in tune to the topic versus a rating agency whose credibility is undoubtedly under pressure now.'"

"Analyst Harry Fong noted in a Sept. 5 report that Allstate was confident about its subprime portfolio. But 'they do admit that a AAA rating for subprime mortgages is not the same as AAA rating elsewhere,' Fong wrote."

From Fortune. "Three years after scraping together $100,000 to bootstrap a maker of athletic clothing, Ryan Oliver wanted expansion capital. He looked where thousands of entrepreneurs have found a ready source of funding, in the value his house."

"Applying for a $25,000 home-equity loan, he figured he was a shoo-in. shoo-in. His credit score was 750 out of a possible 850, and his house was appraised for $650,000, leaving him about $100,000 in untapped equity."

"But three banks - Great Florida, Wachovia, and Washington Mutual - shot him down without specifying why. 'It's almost like they'd created new formulas,' says Oliver."

"Britain's housing market faces 'very substantial' risks as consumers are failing to save enough and have too much debt, said Morgan Stanley chief U.K. economist David Miles."

"'The risks in the U.K. are probably more severe than probably in other countries' in Europe, Miles, who has advised the British Treasury on the property market, said at a conference in London today. 'The U.K. is at one end of the spectrum of where the risks lie,' and there are 'very substantial risks' facing the housing market, he said."

"'The U.K. housing market is heavily dependent on expectations for valuations,' Miles said. 'Expectations are volatile and optimism is a fragile creature. I'm relatively pessimistic about the outlook.'"

"While a shortage of homes available for sale has supported prices, this will 'absolutely not' prevent a drop in home values in the future, Miles said. Higher borrowing costs, record outstanding debts of 1.4 trillion pounds ($2.9 trillion) and low savings rates may all weigh on the property market, he said."

From Reuters. "Housing equity withdrawal fell to 10.001 billion pounds in the second quarter of this year from 13.06 billion in the first three months, the Bank of England said on Monday."

"That took housing equity withdrawal as a percentage of post tax income down to 4.5 percent in the second quarter from 6.0 percent in Q1."

National Mortgage News. "Last week, we reported how loan brokers were getting blamed for the nation's current mortgage mess. I received a ton of e-mails, several with epithets aimed at consumer advocate Bruce Marks of Neighborhood Assistance Corp. of America who before Congress likened brokers to a pest commonly found in several Jersey City apartments that I rented in my youth."

"This e-mail response from 'Lennie' shall serve as a rebuttal to Mr. Marks' comments: 'In 14 years I never, nor anyone that has worked for me, crossed the line of illegal activities to get a paycheck and when those crazy ass investors came out with things like the stupid interest-only (loan) I refused to sell them and anyone that wanted one I told them no and if they went elsewhere to get it I'd say call me when you see what you got into. This type of program was stupid and greedy created by investors not brokers.'"

"When you have lemons, make lemonade. Countrywide Home Loans — whose subprime servicing portfolio has a delinquency rate north of 20% — also has $188 million in foreclosed real estate on its books. (At the end of December that figure was just $27 million.)"

"Over the past month I've talked to a few now-job-seeking mortgage executives who are putting together business plans to invest in delinquent loans or start lending shops to fund the purchase of REO…"

"NetBank, a $2.5 billion thrift that two years ago ranked among the top 50 residential lenders in the U.S., has gone bust. The Office of Thrift Supervision took them over on Friday."

"This comes from an industry veteran who recently found an old e-mail from a friend and passed it on. It concerns the failure of New Century Financial Corp., once the nation's top subprime wholesaler. When New Century filed for bankruptcy protection the friend quipped: 'All the Lamborghini dealers in Orange County flew their flags at half-mast.'"

"And now for some good news, well sort of. According to Friedman Billings Ramsey, 89.9% of subprime loans funded in 2007 were still current as of June 30."

"Bill Gross, manager of the world's biggest bond fund, said falling home prices will be the main driver of U.S. monetary policy for 'several years,' and repeated his forecast the Federal Reserve will lower the federal funds rate to at least 3.75 percent in the coming 12 months."

"'The downward path of home prices, however, will dominate Fed policy over the next several years as will the lingering unwind of related financial structures and derivatives that have yet to be discovered by the public, and marked to market' by their holders, Gross wrote."

"Events that may delay rate cuts this year, Gross wrote, include 'false hopes of a housing bottom, fears of a dollar crisis, or misinterpreted one month's signs of employment gains and faux economic strength.'"

"The fate of the world economy hinges on what happens to house prices in America and that may not be a good thing, former Federal Reserve chairman Alan Greenspan said on Monday."

"Greenspan maintained the global economy was just as linked as ever, disagreeing that there had been a decoupling between the fate of the U.S. economy and that of the rest of the world. 'The critical variable in this judgement is the price of homes in the United States,' said Greenspan, who ran the U.S. central bank for more than 18 years until he stepped down in 2006."

"House prices in the United States will continue to decline as new sales are still barely denting the supply overhang, former Federal Reserve Chairman Alan Greenspan said on Monday."

"Greenspan said...speculative fever must be allowed to run its course to enable a full recovery. 'As in similar situations of inventory excess, I would expect home price declines to continue until the rate of inventory liquidation reaches its peak,' Greenspan told an audience at Reuters in London."

"'There is little relevant American history to guide us in judging the ultimate extent of home price decline or the timing of a new price recovery, or by extension, the economic impact on the rest of our trading partners,' Greenspan said. 'All that I conclude is that the process of inventory adjustment has just started and we have a long way to go before residential housing and mortgage markets stabilize in the U.S.'"