Some housing bubble news from Wall Street and Washington. Reuters, "GMAC reported a $1.6 billion third-quarter loss on Thursday, as housing and capital market disruptions caused losses to hemorrhage at its home lending unit. Results reflected a $2.26 billion loss in GMAC's Residential Capital LLC, or ResCap, mortgage unit, including a $1.81 billion operating loss and a $455 million goodwill write-down."

"Moody's on Thursday downgraded GMAC and ResCap's debt ratings deeper into 'junk' territory, saying ResCap may need more capital to keep operating normally."

"'The third-quarter financial performance of ResCap is a major disappointment,' GMAC CEO Eric Feldstein said in a statement. 'Weakness in the housing market and mortgage industry continues to prevail.'"

"Like many lenders, ResCap has struggled as falling home prices and rising interest rates have made it tougher for many homeowners to keep up with their mortgage payments."

"Credit Suisse said third-quarter profit at its investment bank was all but wiped out by writedowns...of over 2.2 billion Swiss francs ($1.9 billion) in leveraged loan commitments, residential mortgages and collateralized debt obligations."

"'The extreme market conditions that characterized the third quarter affected many of our businesses,"' CEO Brady Dougan said in a statement on Thursday. 'It is too early to predict when all of the affected markets will return to normal levels.'"

"Chief Financial Officer Renato Fassbind left open the possibility of Credit Suisse having to make further valuation changes, which may include writedowns to its credit markets exposure, cautioning that 'fair value accounting is subject to market developments.'"

From Bloomberg. "Radian Group Inc., the third-biggest U.S. mortgage insurer, reported a loss of $703.9 million, the largest yet in an industry roiled by claims from failed home loans."

"The worst U.S. housing slump in 16 years deepened as homeowners with private mortgage insurance defaulted on 22 percent more loans in September than a year earlier, according to an industry trade group."

"'Radian has higher exposure to some of the riskiest product lines, including second liens, which may continue to add to losses in the quarters ahead,' Andrew Brill, an analyst at Goldman Sachs said today. 'Major risks remain.'"

"'Mortgage insurance credit losses will continue to impact our results for the foreseeable future,' CEO S.A. Ibrahim said in the statement."

"Credit-default swaps tied to Radian soared 123 basis points to 835 basis points, the widest level in 11 weeks, according to CMA Datavision in New York. The derivatives are used to speculate on the company's ability to repay its debt, or hedge against the risk it won't. They rise as investor confidence deteriorates."

From Business Week. "An exotic form of bond insurance could be the next hidden hazard to blow up in the global credit minefield. An obscure company called ACA Capital might spark the explosion."

"Now the crisis is spreading from Wall Street, which has taken $35 billion in subprime-related write-downs and lost more than $220 billion in stock value, to a less well known corner of the financial world, that of the bond insurers."

"These firms sell insurance to banks and other major investors for bonds backed by mortgages and the complicated investments that hold the bonds, known as collateralized debt obligations [CDOs]."

"Anxiety has focused on ACA Capital, a small player with big exposure to CDOs."

"A New York company with less than $500 million in annual revenue, ACA has just $326 million in capital for potential payouts if the CDOs it insures go bad. Yet it has sold coverage worth nearly $16 billion, with most policies written for CDOs created in the past couple of years."

"Those are especially problematic vintages because lending standards grew so lax in 2006 and 2007. Many believe the subprime debacle has yet to run its course."

"'There was a perception that the worst was over," says Timothy M. Ghriskey, a co-founder of the $250 million Solaris Asset Management. 'But there's no question this is going to go on for a while.'"

From Forbes Financial. "The US financial sector will still see 'considerable' write-downs in the coming 6-12 months, Pimco managing director Bill Gross told Boersen-Zeitung."

"'Oxygen is the enemy of bacteria, and sub-prime loans as well as other debt need fresh air and must be exposed to pricing by the market,' Gross said. 'Keeping loans in the books only delays this painful process.'"

"U.S. home foreclosures doubled in the third quarter from a year earlier as subprime borrowers failed to make higher payments on adjustable-rate mortgages, RealtyTrac Inc. said"

"California, Florida and Ohio accounted for 44 percent of the total, and Nevada had the highest foreclosure rate at one for every 61 households. Forty-five of 50 states had increases."

"Foreclosure filings in the third quarter increased 30 percent from the previous three months."

"California, with some of the most expensive U.S. homes, had 148,147 filings on 94,772 properties, a 36 percent increase from the second quarter and a nearly four-fold jump from a year ago, RealtyTrac said. Florida, where speculators bet on rising home prices, had 86,465 filings on 60,992 properties, up 50 percent from the second quarter and more than double a year ago."

From CNBC. "I know a lot of you don’t like the foreclosure reports offered by RealtyTrac because of the methodology involved. RealtyTrac counts 'foreclosure filings,' which include default notices, auction sale notices and bank repossessions, so one property could ostensibly get several hits."

"But you all should know that in the 2007 mid-year report, RealtyTrac started a new data string, a count of 'unique addresses in some stage of foreclosure. This new metric only counts a property once, even if there were multiple foreclosure actions filed against the property during the time period covered by the report.'"

The Associated Press. "New York Attorney General Andrew Cuomo said Thursday a major real estate appraisal company colluded with the nation's largest savings and loan companies to inflate the values of homes, contributing to the subprime mortgage crisis."

"'This is a case we believe is indicative of an industry-wide problem,' Cuomo said in a news conference."

"Cuomo announced a lawsuit against eAppraiseIT that accuses the First American Corp. subsidiary of caving in to pressure from Washington Mutual to use a list of 'proven appraisers' who he claims inflated home appraisals."

"He also released e-mails that he said show executives were aware they were violating federal regulations. 'These blatant actions of First American and eAppraiseIT have contributed to the growing foreclosure crisis and turmoil in the housing market,' Cuomo said in a statement. 'By allowing Washington Mutual to hand-pick appraisers who inflated values, First American helped set the current mortgage crisis in motion.'"

From KATV 7. "For the second time in two months the Federal Reserve has lowered interest rates. However, if you're looking to buy a house, experts say the federal interest rate cut doesn’t mean you'll get a lower mortgage rate."

"One local mortgage broker says rates actually rose just a bit Wednesday, but a local realtor says housing prices are dropping. So, even though you're getting a higher-rate mortgage, you could also potentially pay below market-value on your next home."

"Meantime, you've probably seen a few more 'For Sale' signs in your neighborhood lately. Realtor Joanne Homeyer explains her theory on why. 'A lot of it, I feel like, is the bad publicity,' Homeyer said."

"Lender Jim Carroll says a cut from the Federal Reserve doesn’t mean you'll save on your 30-year fixed-rate loan. 'In the grand scheme of things we do not have a direct relationship with a Fed cut lowering our rates,' he said."

"Central banks, lauded as near infallible pilots of the monetary economy in recent years, are facing uncomfortable doubts about their collective grip on credit markets, interest rate structures and inflation"

"The net result is that market inflation expectations, crucial in assessing investor confidence in central banks keeping a lid on inflation over time, are now rising."

"'The Fed's forecasting record is in tatters, the dollar is in tatters and inflation expectations are ticking up,' said Nick Parsons, chief market strategist at nabCapital in London. 'They are now in danger of losing control of every part of the yield curve from overnight out to 10-years.'"

"'Losing control of Libor may be unfortunate, but losing control of official rates is potentially disastrous,' he said."

"Whether he carries part of the blame or not, former Fed chief Alan Greenspan said this month he believes central banks, including the Fed, have struggled for years to influence long-term rates central to the pivotal housing boom and bust."

"'Central banks have essentially lost control of markets beyond 3, 4, 5 years out,' Greenspan said."

"Even if you believe the leading central banks are still in charge Thomas Mayer, chief European economist at Deutsche Bank, says the dilemma they face is that 'there is no nice, middle way.'"

"Helping debtors repay is one thing, but if inflation erodes the value of those repayments, creditors will demand a price that will lead to higher borrowing costs."

"'If financial markets wake up to rising inflation -- then we have a problem,' said Mayer."

From Timberline Magazine. "The housing correction continues: Both total starts and single family starts are off 31% from year ago levels (September 2006). Inventories of new homes for sale remain at 8.2 months supply (August) while existing homes have a 10 month supply. The total inventory is 529,000 new homes and 4.56 million existing homes – that’s 5.1 million homes for sale – about double the typical inventory over the past decade."

"To date, new home prices are coming down faster than existing homes, probably because there is more incentive (inventory carrying cost) for the builders to unload bloated inventories. "

"A common problem, however, is that many of the potential buyers of new homes are owners of existing homes and in most cases; they need to find a buyer for their home before they buy a new home. That means existing home prices have to come down quite a bit."

"The message to me is that the builders are really trying their best to lower inventories; by lowering prices and offering other incentives; however, until existing homes prices show more of a downward correction (thus improving affordability), the overall housing market won’t pick up much momentum in my opinion. "

"Existing homes represent about 85% of the housing market, and because the inventory overhang is greatest there (10 months versus 8 months for new homes – and many of these 'existing homes' are newly bought (speculation), but now vacant, thus competing directly with 'new homes'), the overall housing market won’t reverse course until the problems ( prices are too high) in the 'resale market' are fixed."

"Prices are still too high in many regions of the country, particularly when factoring in higher interest rates and tighter lending standards which reduces the potential pool of buyers."

"The 'obvious solution' is a significant fall (10% or more) in prices for existing homes - will it happen - and will it adversely affect the rest of the economy, is the 64,000 dollar question. Personally, I believe the economy is strong enough to absorb the recession in the housing market and further fall in existing home prices."