Some housing bubble news from Wall Street and Washington. Wall Street Journal, "Countrywide Financial Corp. posted its first quarterly loss in 25 years in the third quarter on $2.27 billion in mortgage losses and write-downs and soaring credit-loss reserves. The write-downs entailed an $830.9 million write-down in the value of mortgage servicing rights, $716.7 million in the write-down of mortgages and mortgage-backed securities and a $718.6 million loss on the sale of loans and securities."

"In addition the company's loan-loss reserves surged to $934 million from $38 million amid continued weakness on prime home-equity loans. Some analysts have been questioning if lenders maintained adequate underwriting standards when making such loans."

From MarketWatch. "'Countrywide's results for the third quarter of 2007 reflect the impact of unprecedented disruptions in the U.S. mortgage market and the global capital markets, as well as continued weakening in the housing market,' said CEO Angelo Mozilo in a statement."

The Associated Press. "Some 4.41 percent of Countrywide's conventional first mortgage loans were delinquent as of Sept. 30, up from 2.57 percent in the year-ago quarter. For prime home-equity loans, delinquencies inched up to 13.5 percent compared to 13.4 percent."

"The number of subprime loans that were behind in payments soared to 29.08 percent, compared to 18.32 percent in the year-ago period."

"In the subprime loan category, 12.63 percent of the loans were behind in payments by 90 days or more, more than twice the year-ago rate."

From Bloomberg. "Late payments and defaults among subprime mortgages packaged into bonds rose last month as higher loan rates and weaker home prices pushed homeowners to the brink, according to data for loans underlying ABX derivative indexes."

"After September mortgage payments, 21.3 percent of the loan balances from 20 deals created in the first half of 2006 were at least 60 days late, in foreclosure, subject to borrower bankruptcy or already turned into seized property, up from 19.7 percent a month earlier, according to a report yesterday from UBS AG."

"Prepayments on mortgages also slowed, suggesting it's more difficult for borrowers to sell their homes or refinance, UBS analysts led by Thomas Zimmerman wrote."

"'We also suspect that the deterioration of the housing market might also have affected owners' psychology with respect to making timely payment' on loans that have yet to adjust, the analysts wrote. 'Certain borrowers may have decided that it's time to throw in the towel.'"

From Business Week. "Big investors are increasingly concerned about the prospect of widespread defaults among U.S. companies with currently sound credit ratings. One glaring piece of evidence? The price of insuring corporate debt against default has soared, according to a new report from Credit Derivatives Research."

"The concern is driven by several forces, according to Credit Derivatives. There's a fear that troubles in the housing market will depress consumer spending. There's also rising nervousness that huge, credit-related write-downs in the banking sector could force a major financial institution to go under, according to Backshall."

"Jitters abound in the market. On Oct. 25, shares of insurance and banking giant American International Group (AIG) dipped more than 6% at one point, after a Citi Investment Research analyst estimated that AIG could face losses as high as $1.6 billion from its exposure to subprime markets. The financial-services conglomerate said those fears were unfounded."

"Even more worrisome, the price of insurance on the supposedly safest 'super senior' class of CDX debt is rising, too. The price of such insurance on the 'super senior' tranche is now $140,000 a year, up 55% in just the past week, fueled by heavy demand."

The New York Times. "Europe, which once hoped to avoid major fallout from the summer’s credit crisis, is now feeling an autumn chill of slackening economies and warnings of further market upheaval."

"The ill tidings came in several European capitals Thursday, including a reduced growth forecast in Germany and a Bank of England report that said financial markets were still vulnerable to shocks from the crisis that originated in the American home mortgage market."

"'The shift in sentiment this summer was as sudden as anything I’ve seen in my 15 years in the business,' said Jörg Krämer, the chief economist of Commerzbank. 'It is clear that the boom is over.'"

"For those who argued that Europe could sidestep a downturn in the United States...the latest news underscores that the economic vigor of Europe remains closely linked to that of the United States."

"'There was only a temporary decoupling of Europe and the U.S.,' Mr. Krämer of Commerzbank said. 'The credit crisis has had a real-world economic impact in the U.S., and we are affected by that.'"

The Dallas Morning News. "Some 20 years ago when the housing market was in a similar foreclosure meltdown, government regulators came up with a shrewd plan for quick relief."

"To fend off record home loan defaults in Texas, federal savings and loan regulators instructed lenders to reduce the monthly payments on thousands of home loans in the state."

"Indeed, I heard of few cases where lenders moved to cut folks' payments. And the foreclosure landslide continued to wipe out thousands of the state's homeowners in the late 1980s and into the early 1990s. Along the way, our housing values got clobbered by more than 20 percent."

"So you can understand why I wasn't surprised to read a...study by Moody's found that only 1 percent of subprime loan servicers had modified adjustable loans to help out strapped borrowers."

"With everyone from consumer advocates to Washington politicos hollering for borrower forbearance in the mortgage crunch, is this surprising? It shouldn't be. After all, mortgage companies aren't in the business of making it easy for borrowers to get out of bad deals."

"One big mortgage company that bragged about its high loan modification rate later fessed up that it was counting deed-backs in lieu of foreclosure as a 'modified' loan. Sure thing – the borrowers were modified right out of their house."

"At the same time, wild-eyed proposals floating around for legally mandated foreclosure moratoriums and such are just plain crazy. If you declare a foreclosure moratorium, then expect a lending moratorium, too."

"Who is going to loan money on a property that you can't collateralize?"

From Reuters. "Standard Pacific Corp, which builds homes in the once-hottest U.S. markets, reported a steep quarterly loss on Thursday, reflecting the deepening U.S. housing slump."

"The company reported a third-quarter loss of $119.7 million. The results included $223.5 million in charges related to inventory and joint venture impairments as well as land deposit write-offs."

"Homebuilding revenues fell to $675.5 million from $834.1 million last year as new home deliveries fell 25 percent to 1,697. Would-be buyers canceled their orders at a rate of 34 percent."

"'High levels of unsold new and existing homes, decreasing home prices, tenuous homebuyer confidence and further erosion of mortgage credit liquidity during the quarter combined to undermine any stability within the markets,' said Stephen Scarborough, Standard Pacific's CEO."

"Standard Pacific had an eight-month supply of unsold new homes and more than $139.2 billion of adjustable-rate mortgages that are resetting higher in the final three months of this year, raising the possibility of more foreclosures."

"Standard Pacific gets most of its revenue from California. Home sales in the state fell 39% last month, and the median price of an existing home slumped 4.7% as the mortgage market's problems hurt demand, the California Assn. of Realtors said."

"The company, founded 41 years ago, said Wednesday that it was eliminating the dividend to save $10 million a year to reduce debt. It has $2.2 billion in long-term borrowings and a market value of about $380 million."

From Builder Online. "With home orders falling 23 percent, closings sliding 28 percent, and a 41 percent cancellation rate, Meritage Homes joins the long list of big builders who faced an unstable third quarter. The Arizona-based builder is reporting a net loss of $119 million for the period ending Sept. 30."

"'Current market conditions are as weak as they've been for many years, and it's unclear when conditions will improve. Home sellers are reducing prices to compete aggressively for fewer buyers, and buyers are looking for prices to stabilize before purchasing,' said Meritage CEO Steven J. Hilton in a released statement."

"'The precipitous declines in states like Florida, California, and Nevada are well-known, and sales in Texas also slowed noticeably this quarter.' Hilton said. 'In order to strengthen our balance sheet and reduce debt, we liquidated over 11 percent of our spec inventory this quarter, renegotiated or opted out of about 6,000 lot purchases under option contracts, and reduced our total lot supply by 20 percent.'"

From Prime Newswire. "Meritage reported...pre-tax non-cash real estate-related and joint venture valuation adjustments totaling $172 million, and goodwill-related write-off of $45 million in the third quarter of 2007."

"The real estate-related charges included $100 million write-downs of inventory on continuing projects, $49 million for terminated projects, and $23 million relating to joint ventures. The charges by state were as follows: California ($67 million), Arizona ($47 million), Nevada ($32 million), Florida ($15 million), Colorado ($10 million) and one terminated project in Texas ($1 million)."

"The continued weakness and expectations that the downturn of the housing market will be deeper and longer than previously anticipated caused the Company to evaluate and write off $45 million of goodwill, including all goodwill in California ($14 million) and Florida ($10 million), and portions of the goodwill in Nevada ($11 million) and Arizona ($10 million)."

"The goodwill write-offs reflect the current state of the homebuilding market and the accounting consequences of valuing divisions based on declining stock prices."

The Intelligencer. "Local home builders looked ahead 10 years Thursday and tried to picture what their industry would be like. Their crystal balls were murky."

"'I see our future as very muddy, very different,' said Scott Cannon, president of Cannon Custom Homes in Avondale, Chester County."

"Jeffrey Orleans, CEO of Bensalem-based Orleans Homebuilders, ...blasted national builders such as K. Hovnanian for their widely publicized 'fire sales,' in which the builder advertised deep discounts on new homes.'"

"'Every builder has his own problems,' Orleans said. 'But when you see the fire sale ads, it makes people concerned. It’s a negative in the market. This market wasn’t so bad. Now it’s getting worse because the publicity is worse.'"

"Rick Buchholz, VP of Hovnanian in Pennsylvania, defended the sales. 'The pain of this is exceptional,' he said. 'While I don’t write a check (giving money back) every time somebody closes a home, the company does. The need for a sale...for us, it’s a necessity. We need to sell hundreds of homes a month to continue.'"