Some housing bubble news from Wall Street and Washington. Bloomberg, "Barclays Plc, the U.K.'s third- biggest bank, wrote down about 1.3 billion pounds ($2.7 billion) of credit-related securities tied to the U.S. subprime-mortgage market collapse. Barclays booked a gross writedown of 1.7 billion pounds on subprime-related assets and loans for leveraged buyouts."

"The charges and writedowns in October reflected 'rating agency downgrades on a broad range of CDOs and the subsequent market downturn,' the bank said."

"'We have taken the opportunity to draw the line' on the bank's riskiest credit-related securities, Barclays President Robert Diamond said. 'The issues in subprime are deep.'"

"Barclays has marked its securities to markets 'where we can find them,' said Finance Director Chris Lucas said on the call. The bank has 'ongoing exposure'' to U.S. subprime assets, Lucas said. 'Where there is no market, it has valued them at fair value, he said."

"The writedown of 800 million pounds in October is to accommodate 'triggers' that may result in further declines in the value of credit-related securities later this year and in 2008, Diamond said."

From MarketWatch. "Subprime mortgage lender NovaStar Financial Inc. reported a $598 million quarterly net loss late Wednesday and said that its shares may be de-listed from the New York Stock Exchange."

From Reuters. "In its quarterly report filed with securities regulators, Kansas City, Missouri-based NovaStar outlined several scenarios under which it might seek bankruptcy protection for creditors. These included a failure to extend a waiver expiring November 30 of a net worth covenant under its financing agreements with Wachovia Corp."

"They also included margin calls, big legal expenses, and other 'unforeseen adverse liquidity events (that) could cause the company to exhaust its cash balances.'"

The Kansas City Business Journal. "With the loss, the company's shareholder equity figure was at a deficit of $80.7 million. As of Tuesday, the company said it owes $83.9 million to Wachovia. NovaStar said there is no assurance it can obtain additional waivers or be able to repay its outstanding debt to Wachovia, which could cause NovaStar to file bankruptcy."

"'Accordingly there can be no assurance that we will be able to continue as a going concern,' NovaStar said in the SEC filing."

"Outside investors have pulled $600 million from a General Electric Asset Management fund struck by losses in mortgage-backed securities, the company said Thursday... leaving GE's pension the sole participant in the fund with an unrealized loss of $200 million."

From Barron's Online. "Outside institutional investors therefore face a 4% loss on their holdings. Based on information on GE Asset Management's Website, the enhanced cash fund has about 27% of its assets in home-equity asset-backed securities, 23% in residential mortgage securities."

"In response to the Barron's inquiry, GE Asset Management said in an e-mail statement that it has 'ceased taking new investments' in the fund "based on our belief that recent extreme conditions in the credit markets, including liquidity concerns and value dislocations, will continue in the foreseeable future."

"Finance company GMAC's Residential Capital home mortgage unit may be close to violating certain debt covenants due to a plunge in its net worth, the Wall Street Journal reported in its online edition on Thursday. ResCap is the second-largest independent U.S. mortgage lender after Countrywide Financial Corp."

"ResCap is now burdened with loans that are rapidly declining in value, the Journal said, adding the situation has triggered concerns its lenders will demand immediate payment or force the unit into bankruptcy protection if GMAC or its owners don't step in with an equity injection or other measures."

"A Bear Stearns investment fund hurt by the decline in the subprime mortgage market and facing creditors' complaints about its management asked a Delaware judge to allow it to dissolve and liquidate its assets."

"'The partnership can no longer operate in the manner contemplated' by the agreement that created it, Bear Stearns lawyers said in their request."

"Bear Stearns said in securities filings that the company's losses from funds included a $200 million write-off of its investment in the fund and anticipated fees. Other investors may have lost more than $600 million as a result of the funds' meltdown."

"Sumitomo Trust & Banking Co., Japan's fifth-largest bank by market value, said first-half profit fell 41 percent on higher provisions for bad loans, including credits linked to defaults on U.S. mortgages."

"Losses linked to the record defaults in the U.S. mortgage market will probably increase to about 20 billion for the full year, from 9 billion in the first half, Yutaka Morita, president of Sumitomo Trust, said. The bank added 36.1 billion yen to provisions for loan losses in the period."

From Fortune Magazine. "Investors might want to take a closer look at Fannie Mae's latest earnings report. Lost in the unsurprising news of the mortgage lender's heavy losses was a critical change in the way the company discloses its bad loans, a move that could mask that credit losses that are rising above levels that the company predicted just three months ago."

"It all comes down to what's known as the credit loss ratio. The credit loss ratio expresses bad loan losses as a percentage of Fannie Mae's loans."

"Management acknowledges that credit losses are mounting. During an analyst call last week, Fannie Mae CEO Daniel Mudd warned that the company's loss ratio could rise to eight to 10 basis points in 2008, due to a worsening housing market. It's not clear whether that forecast is based on the old or new methodology."

"The company may already be exceeding that 2008 guidance. Based on the old methodology for calculating the loss ratio for the third-quarter alone, the company's annualized loss ratio is already at 14 basis points. If so, Fannie Mae's mounting losses are disturbing."

"Yesterday, following a month of inquiries by Bloomberg News to Florida officials, Governor Charles Crist held a public meeting disclosing that 4 percent of the state's short-term investments, including those in the state pool, had been downgraded by credit rating companies."

"State officials have no business putting taxpayer money into debt investments that have baffled even the most seasoned Wall Street executives, says Joseph Mason, finance professor at Drexel University and a former economist at the U.S. Treasury Department."

"'Municipalities shouldn't be playing like they're expert investors, squeezing the last penny out of SIVs,' Mason says. 'They're making a giant jump into a new product area which has unknown, unforeseen risks.'"

Dow Jones Newswire. "Michael Milken, widely regarded as the founder of the junk bond market, believes defaults from mortgages will be greater than in high-yield bonds."

"'Today many AAA-rated mortgage securities will have higher default rates than single-B industrials,' Milken said."

"The crisis of confidence in bond insurers may cost investors as much as $200 billion. The AAA ratings of MBIA Inc., Ambac Financial Group Inc. and their five smaller competitors are being reviewed by Moody's Investors Service and Fitch Ratings."

"Without guarantees, $2.4 trillion of bonds may fall in value and some issuers would get shut out of the capital markets."

"'We shudder to think of the ramifications,' said Greg Peters, head of credit strategy at New York-based Morgan Stanley, the second-biggest U.S. securities firm by market value. 'You have politicians, taxpayers, municipalities, states. It just opens up a Pandora's box. That is a huge destabilizing force.'"

"TOUSA, Inc. today reported a net loss for the three months ended September 30, 2007 of $619.7 million. Adversely impacting net income is $530.6 million of pre-tax charges resulting from goodwill impairments and the write-down of assets."

"Of this amount, $63.3 million of inventory impairments are related to active communities, $441.2 million are related to land impairments, deposit write-offs and abandonment costs."

"The Company's gross profit margin, excluding impairment and related charges, decreased to 17.7% in the third quarter of 2007 from 22.8% in the third quarter of 2006. Home sales gross profit was primarily impacted by higher incentives, which increased to $45,300 per delivery for the third quarter of 2007."

"The Company's sales orders cancellation rate was approximately 47% for the three months ended September 30, 2007. The Company attributes the unusually-high cancellation rate to the dramatic tightening of the credit markets, buyer's inability to sell their existing home, diminished consumer confidence, the oversupply of new and existing homes available for sale, increased foreclosures and downward pressure on home prices."

"As of September 30, 2007, the Company had stockholders' equity of $48.3 million. Based on the foregoing, the Company believes there is substantial doubt about its ability to continue as a going concern."

The Street.com. "With the heat on from its creditors, troubled Florida condo developer WCI Communities is scrambling to look as healthy as possible. While the company can't hide its weak cash flows, it may be employing unusual accounting assumptions to delay large land impairment charges that would reduce book value further."

"Nearly all of WCI's impairments to date have been for finished home, not raw land or homes/communities under development. This differs from many other homebuilders such as Lennar and D.R. Horton, which have recorded meaningful impairments of raw land and communities under development."

"For example, in its most recent quarter D.R. Horton said about 75% of its impairment charges nationally were recorded to residential land and lots and land held for development."

The Associated Press. "Wells Fargo & Co. President and Chief Executive John Stumpf said Thursday the housing market is experiencing its worst decline since the Great Depression."

"Stumpf said...that rapidly declining housing prices are likely to put even more pressure on delinquencies and defaults. 'I don't think we're in the ninth inning of unwinding this,' Stumpf said, relating the declining housing market to a baseball game. 'If we are, it's going to be an extra-inning game.'"

"Stumpf said the downturn resulted in part from 'froth, unscrupulous lenders, (and) borrowers who got too greedy. In 2006 the music stopped.'"