Some housing bubble news from Wall Street and Washington. Bloomberg, "Fannie Mae, the biggest source of money for U.S. home loans, reported that its third-quarter loss doubled and said credit costs will increase as the housing slump deepens. The net loss of $1.39 billion, or $1.56 a share, was caused by a $2.24 billion decline in the value of derivatives contracts used to protect against defaults linked to its $723.2 billion of home-loan and mortgage-bond holdings, the Washington-based company said today."

"CEO Daniel Mudd said the housing market will worsen. Fannie Mae confronts 'one of the most challenging mortgage and housing markets in recent history,' Mudd said. The company 'is not immune to the challenges facing the mortgage markets.'"

"Credit losses this year have risen to as much as 6 basis points from about 2 basis points, Mudd said in a Sept. 27 interview. Fannie Mae, which owns or guarantees about 20 percent of the nation's $11.5 trillion residential mortgage market."

The Associated Press. "The results also marked a significant milestone for Fannie Mae: They brought the company current in its financial reporting for the first time since 2004, when a massive accounting crisis tarnished its reputation and swept the top executives from office."

"New York Attorney General Andrew Cuomo said Wednesday that he has issued subpoenas to government-sponsored lenders Fannie Mae and Freddie Mac. Cuomo said he wants to know about loans Fannie Mae and Freddie Mac purchased from banks, including Washington Mutual."

"The subpoenas also seek to find out how the government-sponsored companies handle appraisals. 'If true, the appraisal practices described in the complaint would violate Fannie Mae's requirements for loans we purchase from lenders or securitizers,' said Brian Faith of Fannie Mae."

"Fannie Mae and Freddie Mac were created by Congress to make home ownership affordable for low- and middle-income people."

From CNBC. "At the very end of the hearing, Sen. Schumer asked the Fed Chairman Ben Bernanke what his recommendation would be should the Congress increase the loan limit that the GSE's are allowed to purchase (the limit now stands at $437,000)."

"Bernanke replied simply, 'A million.'"

"So when did a million-dollar home become low, moderate, or even God-forbid middle income?? According to the National Association of Realtors, the median price of a home is around $220,000, and I know I don't have to explain the meaning of median to an economist, but come on!"

"Apparently Mr. Bernanke thinks that instead of letting the housing market correct itself, that we should just take one of the most trusted types of lending institutions out there and let them play with the big boys and their big bad mortgage backed securities."

"Never mind that the market went completely haywire during the recent housing boom, and was fed by often negligent mortgage products, and that perhaps the focus should be on bringing affordability back at least into the nearest stratosphere."

"Have we learned nothing these past few months?"

"In a letter to Cuomo, sent today, Office of Federal Housing Enterprise Oversight Director James Lockhart said Fannie and Freddie should not have to stop these purchases from Washington Mutual, 'which you have not charged or subpoenaed, unless certain conditions stipulated by you are met.'"

"Lockhart also said Fannie and Freddie both retain the credit risk of the mortgages it buys and securitizes, unlike private label issuers of mortgage-backed securities. 'Consequently, they have no economic incentive to knowingly purchase or guarantee mortgages with inflated appraisals,' Lockhart wrote."

"Wachovia Corp., the second-largest regional bank, said mortgage-related losses total $1.7 billion so far this quarter, more than the lender reported for the previous three months."

"The value of the bank's holdings have continued declining in November, with all asset classes 'extraordinarily volatile,' the company said in a filing with the U.S. SEC."

"The weakening markets, which Wachovia estimates could get worse over the last two months of the quarter, cut the value of the bank's CDO holdings by more than 60 percent. As of Sept. 30, Wachovia had $1.8 billion in CDO exposure; after the writedowns, the exposure is now $676 million."

"Wachovia has an additional $2.1 billion of exposure to more traditional subprime mortgage-backed bonds. The value of those holdings remained steady in October as hedging strategies offset losses."

From Forbes. "Germany's Allianz, Europe's largest insurer reported heavy subprime losses at its subsidiary Dresdner Bank. The company said that that the credit market turmoil had a 575 million euro ($846.1 million) negative impact, including 350 million euros ($515.1 million) in adjustments to the valuation of asset-backed securities."

"'If the market turbulence continues we cannot rule out further write downs or the necessity to draw on liquidity facilities,' said the company."

From CBC News. "Canadian Imperial Bank of Commerce said Friday it expects to take a charge of $463 million in the fourth quarter related to exposure to the U.S. subprime mortgage market. In mid-August, CIBC said it had about $1.7 billion US in the troubled U.S. mortgage market — as much as $1 billion of it relating to subprime mortgages."

"Standard & Poor's said Thursday that a collateralized debt obligation, or CDO, managed by State Street Corp. began liquidating its assets, prompting the ratings firm to slash the investment vehicle's credit grades as much as 18 levels."

"Carina was originally a $1.5-billion CDO issued in September 2006, according to data compiled by Bloomberg News. Senior note holders of the CDO decided to liquidate, S&P said. The firm didn't identify the senior investors."

"The securities will be sold at 'what will most assuredly be depressed prices,' S&P said."

"More than $350 billion of CDOs comprising asset-backed securities might become 'distressed' because of credit-rating downgrades, Morgan Stanley said in a report Thursday."

"Country Garden Holdings Co. and South Korea's Hyundai Capital Services Inc. were among six global borrowers that delayed at least $3.5 billion in sales of U.S. corporate bonds in the last two days."

"Country Garden, China's most profitable builder, failed to attract investors for its proposed sale of $1.5 billion in notes even after offering yields of as much as 10%, according to people familiar with the deal, who declined to be identified because no announcement had been made."

The Wall Street Journal. "Investors are fast losing confidence that bond insurers, who provide a financial anchor for roughly a trillion dollars in debt, will weather the credit-market storm."

"Rising defaults on subprime mortgages and downgrades to bonds' credit ratings are intensifying the fear that insurers of mortgage-related securities will be hit. Bond insurers agree to cover interest and principal payments in the event of default."

"Analysts and investors expressed frustration with what they feel is a lack of detail about the complex securities known as collateralized debt obligations, or CDOs, that Financial Group Inc. insures. 'They won't tell you what deals they own,' said Ann Rutledge, a principal at a structured-credit consulting company. 'It's the granular information that matters.'"

"Historically, Ambac and other bond insurers have been a conservative bunch. Like many on Wall Street, however, bond insurers got caught up in the mortgage frenzy and strayed from their roots."

"Ambac insured $29 billion of CDOs backed by subprime mortgages, the most among U.S. guarantors, according to J.P. Morgan research, which expects the company to take a loss of $4.4 billion on that exposure."

"According to Fitch Ratings, guarantors have written insurance on more than $80 billion of CDOs that pooled subprime-mortgage bonds."

"'They did it very aggressively, and a lot of it was underwritten in the last few years' when loan underwriting standards were poor, said Thomas Abruzzo, a managing director at the ratings company."

The Street.com. "Real estate vulture funds are scouring the U.S. for distressed housing developments and land sites being sold at cheap prices by homebuilders looking to clean up their balance sheets."

"'The market changed in the last 90 days,' says Rich Knowland, a partner with a Seal Beach, Calif.-based fund that is looking for land opportunities on the West Coast. Distressed opportunities are starting to emerge in California and other overheated housing markets."

"They're seeing profit in buying the housing sites today --many of which are selling at 50% or greater below their peak 2005 values -- with the aim of flipping them or selling homes at the projects in two years or more."

"Today, finished home sites and raw land are now being sold by homebuilders for 50% to 75% discounts off peak 2005 values in the formerly hot regions, says John Peshkin, CEO of Starwood Land Ventures. For urban markets, prices have generally dropped about 25% in these states; the peripheral areas may have had 80% to 90% declines."

"In some peripheral areas, sellers can't even catch bids on communities under development and raw land, he says. 'We're not seeing too much competition. Everyone is getting ready and is afraid to catch a falling knife,' Peshkin says."

"'We see in certain situations where that is loosening up, not by choice. Many deals have debt. Prices have to go down to be moved,' says Knowland, who joined Pacific Terra earlier this year after leaving his post as regional VP of Lennar's Orange County, Calif., division."

The Courier Times. "Toll Brothers' homebuilding revenue fell 36 percent in the fourth quarter, and its cancellation rate on new home contracts rose as the housing market slump continued. Robert Toll, CEO of the Horsham-based luxury homebuilder, said October was a slower month than September."

"Cancellations for the quarter totaled 417 homes, or 38.9 percent, compared to 23.8 percent in the third-quarter of the year and 36.7 percent in the fourth quarter 2006."

"'We do think this is worse than it was in '88,' the last time the market slumped, Toll said."

The New York Times. "The housing market is horrible in most parts of the country, says the chief executive of the luxury home builder Toll Brothers, and he fears it will not get better until the newspapers stop saying how bad it is."

"Toll Brothers, which has operations in 22 states, said yesterday that it expected to take a write-down of $250 million to $450 million because of declining land values when it reports results for the quarter that ended Oct. 31."

"Robert I. Toll, the CEO, handed out grades for 37 markets that the company operates in, and most got a mark of F or worse. The lowest grade went to Las Vegas and Tampa, Fla."

"'The fact that I differentiate between F, F-minus and F-minus-minus' shows just how bad things are, he told analysts during a conference call. He said those grades 'go from miserable to outright purgatory.'"

"The company said many of the canceled home purchases were for its more expensive homes. The average price of new orders in the quarter was $646,000, but the average price of canceled orders was $788,000."

"He said a survey of Toll customers who canceled contracts showed that only 11 percent reported trouble getting mortgages. More either had personal financial problems or were unable to sell the homes they already owned. 'People who just wanted to walk' accounted for 17 percent of the cancellations, he said."

"'Translation, they’ve read one too many Times articles, and decided now is not the time to buy a home,' he said."