Some housing bubble news from Wall Street and Washington. "Profits in the Japanese banking sector have taken a 1.2 trillion yen (£5.3 billion) hit from the US sub-prime mortgage crisis and the country’s central bank has said that worse turmoil may be on the horizon. Seiji Nakamura, a board member of the Bank of Japan, said yesterday that it remained 'uncertain when adjustments in the US housing market will end.'"

Dow Jones Newswires. "A pair of banks on Thursday said they will invest about $1.5 billion in French-owned bond insurer CIFG Services. The injection will come from Banque Populaire Group and the Caisse d'Epargne Group, two French cooperative banks that own controlling stakes in CIFG's parent, Natixis. The companies said the move will allow CIFG to keep its AAA credit rating with the three rating agencies."

"Without the credit enhancement provided by companies like CIFG, Ambac Financial and MBIA, the rating agencies are more likely to downgrade the CDOs further. And ratings downgrade in turn could decrease the value of those debt pools further and possibly trigger forced selling by investors who cannot hold instruments without AAA ratings."

"According to a report in The Wall Street Journal, CIFG had direct exposure to residential mortgage-backed securities of $1.9 billion, most of which were backed by subprime mortgages, another $4 billion in CDOs that are backed by subprime mortgage loans and $1.4 billion in 'claims-paying resources.'"

"Fitch Ratings has downgraded its ratings for six collateralised debt obligation asset managers and $29.8bn of CDOs with exposure to US residential mortgages. On Pimco, Fitch pointed to distress in its Pacific Coast CDO before the sub-prime crisis, as well as its Costa Bella vehicle issued in December which has 'significant exposure' to distressed sub-prime assets."

"Separately, Derivative Fitch, a unit of the global ratings agency, has downgraded $29.8bn of CDOs with exposure to US residential mortgages, bringing its total CDO assets downgraded to $67bn."

"The agency said in a statement: 'The updated assumptions reflect increased probabilities of default, reduced recovery assumptions and increased correlation with respect to recent vintage subprime residential mortgage-backed securities and structured finance CDOs.'"

From The BBC. "There has been a slump in the number of mortgages being approved for home buyers by UK banks. The British Bankers Association said that in October its members lent 44,105 mortgages for house purchase. That was 19% fewer than in September, and 37% down on October 2006 when more than 70,000 mortgages were lent."

"The figures suggest that the housing market is about to go through a significant slowdown due to high prices and higher borrowing costs."

'"October's data provide evidence of a rapidly slowing mortgage market and of consumers limiting their personal borrowing,' the BBA's director of statistics, David Dooks, said. Last month also saw a big fall in approvals for remortgaging."

From Thisismoney UK. "Subprime mortgage lender Kensington Group has turned its back on its traditional market in favour of low-risk products. Kensington CEO Alison Hutchinson said: 'Tough times call for tough decisions.'"

"Melanie Bien, director at independent mortgage broker Savills Private Finance, said: 'Kensington was the original subprime lender, whose success encouraged many other lenders to move into the sector. If Kensington can see no opportunities in subprime, what chance have other lenders with less experience got?'"

The Economist. "Northern Rock, it seems, is everyone's problem. The bank, once Britain's fastest-growing mortgage lender, is now a wreck. Having turned to the Bank of England for an emergency bail-out in August, it is unable to repay its loans unaided."

"There can be no good ending to this sorry saga, which had its origins in slack supervision, bad central-bank calls and a panic-stricken rescue. Nationalisation looks the best choice of a bad lot, for it aligns risks and rewards most closely and keeps control in the hands of those who have most invested. But there should be no illusions that it is anything but a mercy killing."

The Irish Times. "With an estimated 10,000 empty apartments in the Dublin area, builders are opting to rent them out rather than try to sell them, says Fiona Tyrrell. The vast majority of these are new apartments which have either failed to sell or have not been put on the market."

"Meanwhile, Dermot O'Leary, economist from Goodbody Stockbrokers, says that stock levels of unsold homes in Ireland 'has risen steadily.' There are now 42,000 second-hand homes for sale - equivalent to a 12-month supply of housing stock, he says. Some regions are more affected than others, according to O'Leary."

"One in 15 properties is on the market in both counties Cavan and Roscommon, he said."

"General Motors Corp. has 'no further obligation' to inject capital into former finance unit GMAC LLC after a $1 billion infusion earlier this year."

"The November 2006 agreement to sell 51 percent of GMAC to a group led by Cerberus Capital Management LP ended any need to fund GMAC beyond $1 billion, Randy Arickx, GM's executive director of investor relations, said."

The Wall Street Journal. "GMAC Financial Services and its owners are exploring options to salvage its unprofitable mortgage arm, and they are undertaking a debt buyback of as much as $750 million, with a long-term eye to the industry's recovery."

The New York Times. "It’s not just subprime anymore. Freddie Mac, the government-sponsored mortgage lending enterprise, said this week that enough borrowers were defaulting on loans made this year or last that it needed to mark down the value of the loans by $1.2 billion."

"How many of those loans were subprime? None."

"The borrowers may not have qualified as subprime, but many of the loans should have raised questions before they were made. 'The underwriting standards declined,' said Anthony S. Piszel, Freddie Mac’s chief financial officer. 'That was across the board.'"

"Those who made loans and expected to sell them quickly did not care much about assuring that the loans would be repaid. It turns out that the financial wizards who made it easy to transfer risk also assured that more risks would be taken. They produced innovations like 'No income, no assets' loans, which, Mr. Piszel said, 'found their way into prime space.'"

"As Mr. Piszel told me, 'As long as house prices were going up, it cured all evils.'"

From Conde Nast Portfolio.com. "James Hamilton took a dive into the balance sheets of Fannie and Freddie. And he's found some pretty scary figures: The total 'book of business' held by Fannie and Freddie between them is now $4.7 trillion, mostly in the form of mortgage-backed securities as opposed to outright mortgages. That means their $65 billion in capital is just 1.4% of their book of business."

"Fannie and Freddie have been reasonably good at avoiding subprime: their $170 billion of subprime MBS is just 3.6% of their total book of business. But it's still $170 billion, which is 2.6 times their total capital."

"The problem FRE has is that the 38% of its book concentrated in '06 and '07 vintages has very different characteristics from the overall book: 39% Alt-A, 44% IO and 14% option arm. (WHAT were they thinking, these past 21 months, enquiring minds want to know?)"

"It's a very good question: Freddie Mac was not founded with the idea that it would buy a pool of mortgages 44% of which were interest-only."

From Bloomberg. "Freddie Mac, the second-largest U.S. mortgage-finance company, may report wider losses than it forecast as the slump in credit markets worsens, Moody's Investors Service said."

"'Continued deterioration in the mortgage market, resulting in further decline in these books, may lead to credit losses in excess of their 11 basis point loss forecast,' Moody's analysts Brian Harris and Craig Emrick wrote in the Nov. 21 report."

"New York-based Moody's said changes in legislation or government support for Freddie Mac's housing mission would lead to a ratings downgrade, which it called 'highly unlikely.'"

From MarketWatch. "While the headlines have been full of stories on the credit crunch, subprime mortgage mess and the real estate bubble, a lot of ordinary homeowners have figured they were immune from the problems."

"An online real estate community reported Tuesday that home values nationally are down more than 5.5% compared with a year ago, with many markets being hit much harder."

"As a result, more than 15% of homeowners nationwide who bought their home in the last year are now underwater. The number is slightly worse for consumers who bought their home two years ago."

"'We are so used to the fantasy that real estate is a great investment and that it always goes up in value that we're surprised when it doesn't,' says author Marc Eisenson. 'This is a scary place to be, and a lot of people who never expected to get here are watching the waters rising -- particularly if they have adjustable-rate mortgages -- and their home values sinking.'"

"Former Federal Reserve Chairman Alan Greenspan said he has 'no particular regrets' and that the deepening slump in the U.S. housing market isn't a result of his policies."

"'Markets are becoming aware of the fact that the decline in house prices is not stopping,' Greenspan said today in Oslo. 'I have no particular regrets. The housing bubble is not a reflection of what we did, as it is a global phenomenon.'"

"The collapse of the U.S. subprime market 'was a shocker because no one expected it,' Greenspan said."

The Housing Bubble Blog on December 11, 2004. "Pricing bubbles often end in a parabolic rise, which we probably saw last year. It is no surprise that what is holding up the market now is lending to so-called subprime borrowers. I view this as bad news for this market as these folks will be in financial trouble even faster."

"Consider that the risk to mortgage lenders increases, suggesting some desperation for borrowers. 'Overall, new originations of subprime mortgages totaled an estimated $375 billion through the end of September, a figure that marked a 63 percent year-to-date rise. Putting that number into perspective, one out of every six new residential mortgages made this year has gone to a credit-impaired'..borrower."

From Reuters. "Former Federal Reserve Chairman Alan Greenspan said on Friday that U.S. house prices have not bottomed out after a crisis in the subprime mortgage market."

"'The markets are becoming aware that the decline in U.S. housing prices is not stopping. It is at an unprecedented pace compared to the last 50 years,' Greenspan told a financial audience."

"He said the housing bubble had burst and the market was 'a good deal away' from its selling climax -- a point at which sellers ultimately lower their prices to match lower bids."

"This was reflected in the large stock of unsold homes and low turnover, which will be overcome only once people start believing such assets are undervalued."

"He said central banks should concentrate on alleviating the economic fallout from burst asset bubbles because they had few methods to prevent them and 'lean against the wind.'"

"'There doesn't seem to me that there is very much evidence that we can do much about them,' said Greenspan, who oversaw Fed policy during the dot-com bubble and the start of the present housing bubble. 'Irrespective if we could identify them, we could not do much to defuse them,' he said of asset bubbles."

The Nashua Telegraph. "The House of Representatives has passed a mortgage reform bill that is as remarkable for what it doesn't do as for what it does. It doesn't include a bailout of borrowers or lenders."

"The Mortgage Reform and Anti-Predatory Lending Act of 2007 seeks to prevent borrowers and lenders from making dumb choices. It doesn't help troubled borrowers and lenders who made poor decisions in the past."

"The bill 'cannot undo what happened, but it makes it much less likely that it will happen in the future,' Rep. Barney Frank, the measure's architect, said a few hours before the House passed it last week, 291-127. 'The fundamental principle of the bill is not to put remedies in place to deal with these problems when they occur, but to stop them from occurring in the first place.'"

"Bursting housing bubbles have exposed bad lending practices. From 2003 until early 2007, mortgage lenders grew ever more lax in their lending decisions. House prices skyrocketed in many markets because nontraditional loans made it possible for buyers to overreach."

"Thus, loose lending led to higher house prices, which led to looser lending, which led to still higher prices. Now the vicious circle is working in reverse."

"Frank and co-sponsors came up with a bill that tries to arrest any future cycles of loose lending and skyrocketing prices."

"Rep. Ed Royce said the bill has 'murky language (that) would invite litigation from every borrower who misses a payment.' He added that 'the main loser will be the subprime borrower who will pay higher rates – if he or she can get a loan at all.'"

"Other Republicans warned that it would be foolish for Congress to restrict credit at a time of falling home sales and house prices."

"But that argument didn't carry the day, as the majority of the House agreed with Maxine Waters, who said that the foreclosure rate has almost quadrupled in her state in the last year. 'Clearly, we need to prevent the now widespread practice of getting people into loans that they can't afford,' she said."

"The debate over mortgages moves to the Senate, where Christopher Dodd,who chairs the Banking Committee, has blamed the mortgage meltdown partly on regulators who, he says, haven't exercised their full authority."

"It's not the best time to be selling a house in much of the country. But increasingly, it's a good time to build or renovate one. The housing slump has pushed down prices on everything from lumber and drywall to labor and design fees."

"It's a striking contrast from the heady days of the real-estate boom, when builders and contractors could hardly keep pace with demand, prices of materials soared and a six-month wait to start a kitchen renovation was commonplace."

"A few months ago, Mike Bowes remodeled the bathroom and guest bedroom of his $200,000 condo in Las Vegas. The job, which cost $14,000, included a walk-in shower, a new vanity, bamboo flooring in the guest room and retextured plaster on the walls and ceilings."

"Last year, the same work would have cost nearly twice as much, he estimates, 'and I would have had to beg someone to do it.' Now, the commercial roofing sales manager is planning to upgrade his kitchen, living room and porch. While prices remain low 'I'm going to keep going,' he says."

"Amy and Bob Phillips of Tucson, Ariz., began work on a four-bedroom, Adobe-style house in February. With newly lower pricing on a variety of items, including stucco, wood and labor, the Phillips were able to afford upgrades such as solid wood doors, glass doorknobs and steel garage doors on their $800,000 budget."

"The couple bid out a backyard pool themselves. By pressuring contractors to lower their bids, the Phillipses have knocked $8,000 off the cost. 'We're definitely playing people off each other, and they're definitely dropping their prices,' says Mrs. Phillips."