Some housing bubble news from Wall Street and Washington. The Guardian, "Construction firm Taylor Wimpey is looking for white knight to rescue it from a disastrous $30m-plus investment on Florida's Gulf of Mexico coast. The company has abandoned its efforts to develop any kind of property on 2.5 acres of edge-of-the-water prime real estate at Clearwater Beach and is looking for a buyer for the land."

"The developer bought the hurricane-damaged, 217-bedroom Adam's Mark Hotel in mid-2005 at a top-of-the-bubble price of $31.5m (£15.12m). Now the company has decided that the Florida condo market is completely overbuilt – it is believed there are 800 condos on the market in the Clearwater Beach vicinity alone."

"News of the Clearwater Beach debacle follows a few days after Taylor Wimpey gave downbeat estimations of its US operations and cut the value of its bank of US plots by $360m or 15% from $2.4bn."

The Independent. "House sellers were this weekend warned not to put their houses up for auction as they are unlikely to sell because of the state of the housing market." "According to new figures obtained by the Sunday Independent, three out of four houses up for auction this year have had to be withdrawn because of lack of interest."

"Dublin estate agent Peter Wyse said: 'Last year, 80 per cent of auction houses were sold at or just after auction. This year, it is the total opposite with 80 per cent of houses being withdrawn because of lack of interest. We are advising people not to use auctions right now.'"

"Elsewhere, as many as 35,000 home owners are set to fall into negative equity after a new report warned house prices will plummet by eight per cent next year. The bad news emerged from a report by Goodbody Stockbrokers that the average value of homes would drop by five per cent this year, meaning a drop of 13 per cent in just two years."

"Goodbody chief economist Dermot O'Leary said the slide into negative equity would affect mainly those who took out 100 per cent mortgages, which were first introduced in 2005. However, Mr O'Leary played down the potential impact on homeowners." "He said: 'It only becomes a problem if the mortgage becomes unaffordable.'"

"Construction activity fell for the fifth month running in October when the sector declined at a marked rate. The latest fall has been linked by firms to weaker new orders, according to new figures from Ulster Bank."

"While the employment indicator only really began to fall in July, the decline accelerated in October with the index just above the low of March 2003."

"'A sharp reduction in supply remains the best guarantee builders have that prices can be maintained. In the past 10 years, new house prices rose by 300pc. So far this year, they have fallen by a little more than 3pc,' said Pat McArdle."

The Financial Post. "Canadian Imperial Bank of Commerce's writedowns related to the U.S. housing market are now estimated at $753-million, the bank said, as banks around the world continued to rack up tens of billions in losses from the panicked credit markets."

"CIBC has written down 44% of its $1.7-billion U.S. residential CDO and RMBS portfolio, and there could be more losses to come. "

"'We continue to see future risks to CIBC given recent explosive growth in more exotic credit instruments,' said Blackmont Capital analyst Brad Smith.. 'We expect losses may continue to emerge regarding CIBC's CDO portfolio.'"

From Bloomberg. "Losses from the falling value of subprime mortgage assets may reach $300 billion to $400 billion worldwide, Deutsche Bank AG analysts said."

"Wall Street's largest banks and brokers will be forced to write down as much as $130 billion because of the slump in subprime-related debt, according to a report today by New York- based credit analyst Mike Mayo,. The rest of the losses will come from smaller banks and investors in mortgage-related securities."

"Deutsche Bank's Mayo expects writedowns at HSBC, UBS AG, Royal Bank of Scotland Group Plc and Barclays Plc to be 'ballpark $5 billion or so' each, he said."

"About $1.2 trillion of the $10 trillion of outstanding U.S. home loans are considered to be subprime, Mayo said in the note. Loss rates on about $200 billion of securities based on derivatives linked to subprime debt will run to as high as 80 percent, Mayo wrote."

"Citigroup Inc.,Bank of America Corp. and JPMorgan Chase & Co., the three largest U.S. banks, reached an agreement on the structure of an $80 billion fund to help revive the market for short-term debt, a person familiar with the talks said yesterday."

"The banks are pushing to have the fund in place by year-end because SIVs are unable to get short-term credit to finance their higher-yielding investments. The plan still has to win the confidence of investors."

"'The whole thing is flawed,' said Josh Rosner, whose New York-based firm analyzes structured finance and real estate investments. 'As opposed to recognizing losses, we're trying to roll those losses into the future, regardless of the sanity or safety and soundness of doing that.'"

"The asset-backed commercial paper market has been shrinking for 13 straight weeks in the U.S. and last week declined the most in two months. The net asset value of SIVs has fallen to 71 percent of initial capital from 102 percent in June, Moody's said last week."

"International Securities Trading Corp. in Dublin said today it's writing down at least 70 million euros ($102 million) from holdings of SIVs."

"A SIV needs the approval of three-quarters of its senior debt holders before it can sell assets to the fund, analysts say. The structure for the super-SIV that the banks agreed to Nov. 9 may lower that requirement, according to the person briefed on the discussions. The fund may also impose fees of as much as 100 basis points, or 1 percentage point, the person said.'

From Fortune Magazine. "Two things stand out about the credit crisis cascading through Wall Street: It is both totally shocking and utterly predictable."

"Wall Street always rides a wave until it crashes. As the fees roll in, one firm after another abandons itself to the lure of easy money, then hands back, in a sudden, unforeseen spasm, a big chunk of the profits it booked in good times."

"'The fee engine becomes so huge that these products take on a life of their own," says Tiger Williams, CEO of a leading financial services firm for hedge funds. 'Everyone rationalizes that it's safe because they're making so much money. But it's far from safe.'"

"Even after the record $8.4 billion writedown for bad debts at Merrill Lynch & Co., the unprecedented ouster of three chief executives within five months and the elimination of $84 billion of market value at the five largest securities firms, Wall Street still is poised to report its second-most profitable year."

"And 2008 may be better."

"'As the bombs are dropping and the mines are exploding, it's a bit of a surprise,' said Kenneth Crawford, who helps oversee $950 million at St. Louis-based Argent Capital Management LLC, which holds Morgan Stanley and Merrill shares."

"Les Satlow, who oversees $450 million at Cabot Money Management, said he's more bullish on prospects for investment banks than commercial banks. 'The securities firms have less exposure to the consumer and greater exposure to overseas capital markets, which have a reasonable chance of remaining solid,' Satlow said."

From Reuters. "Blackstone Group president and chief operating officer Hamilton James said on Monday that the subprime mess that hit Wall Street banks appears to be getting worse. 'The subprime black hole is appearing deeper, darker and scarier than they thought,' James said, referring to investment banks."

"But James added that Blackstone is starting to 'go long' the subprime market, after a successful bet against the sector that played out over the last 18 months. "

From MarketWatch. "Embattled mortgage lender Countrywide Financial Corp. in a regulatory filing conceded that if its credit ratings fall below investment grade, its access to the public corporate-debt markets 'could be severely limited.'"

"As of Sept. 30, up to $5.5 billion of Countrywide's custodial deposit accounts on deposit with the bank could be affected if the credit rating fell into junk status, according to the filing."

"The company said 4.9% of subprime mortgages were pending foreclosure at the end of the third quarter, up from 2.9% a year earlier."

"To this day, Countrywide’s CEO Angelo R. Mozilo says his beleaguered company did nothing wrong during the loose-lending craze that is now unraveling nationwide with record foreclosures and mountainous losses. Instead, Mr. Mozilo considers himself and his company to be victims of financial forces beyond their control."

"At a conference sponsored by the Milken Institute about two weeks ago, for example, he explained that borrowers forced lenders like Countrywide to lower their mortgage standards. The industry faced special pressure from minority advocates to help people buy homes, he said. Now, the government must help by increasing loan limits at government-sponsored enterprises like Fannie Mae and Freddie Mac, he added."

"'No one, including Mr. Mozilo, could have foreseen the unprecedented combination of events that led to the problems borrowers, lenders and investors face with many of these loans today,' said Rick Simon, a Countrywide spokesman."

"'The biggest self-inflicted wound here is they should have pulled back in ’05 and ’06 when you had these competitors doing all sorts of crazy things. Angelo talked about the danger but somehow went for the market share gains anyway,' said Sy Jacobs, a former banking analyst and founder of a New York investment fund."

"For Countrywide...this remains one of the burning and still unanswered questions. Why did the company’s chief, who routinely warned of his rivals’ lax lending practices well before the mortgage market cracked, ultimately allow Countrywide to ardently embrace those practices?"

"'People who get themselves in trouble are good at self-hypnosis. That is why they are such good salesmen — they convince themselves about the story,' Bruce C. N. Greenwald, a finance professor at Columbia Business School, said. 'He was not selling houses. He was selling a dream. And he had lived in a world where there had been no defaults for so long that he didn’t believe they could happen.'"

"Central to Mr. Mozilo’s...strategy was...to constantly snare market share from rivals. While this strategy benefited Countrywide throughout much of its history, when mortgage lending was a more plain-vanilla affair, it turned perilous during the past three years. By then, competition among mortgage bankers was so fierce that the only way to gain share was to loosen underwriting standards."

"'To the extent that more than 5 percent of the market was originating a particular product, any new alternative mortgage product, then Countrywide would originate it,' said a former financial executive at Countrywide who was granted anonymity because he was concerned about legal action from the company. 'Apply that principle to anyone’s business and it would get you in so deep — it’s the proverbial race to the bottom.'"

"When an appraiser hired by your mortgage company confirms that the house you bought is worth what you paid, that's reassuring. But what if the appraiser was pressured to fudge the number?"

"Perry Turner, an appraiser in the Richmond, Va., area, said pressure to inflate values is so widespread that 'it amounts to organized fraud by loan officers based on their need to generate fees and close deals, and then pass the loans on to Wall Street' where they get packaged into the mortgage bonds that are now experiencing heavy default rates and losses to investors."

"'And they all think they're never going to get caught,' said Turner."

National Mortgage News. "Loan abuse story of the week: 'I attended a mortgage event in Chicago last year and sat at a lunch table with some LOs from California. Two men were bragging how they made up to five points on subprime payment-option ARM deals. My processor was with me and it made both of us sick.' — Kathy from Washington."