Some housing bubble news from Wall Street and Washington. MarketWatch, "Washington Mutual Inc. said Wednesday that 2007 credit losses could amount to between $2.7 billion to $2.9 billion, almost double the estimates it made in July when the subprime meltdown was starting in U.S. mortgage markets. In materials for a presentation, Washington Mutual cited Fannie Mae data that suggest U.S. mortgage origination in 2008 likely will total $1.5 trillion for the industry."

"That would be a substantial decrease from $2.8 trillion in 2006 by all lenders. Earlier projections were that new mortgage loan volumes would slump to around $2.4 trillion."

From Reuters. "'The soft landing we were anticipating quickly transitioned to a severe downturn,' WaMu CEO Kerry Killinger said in a presentation to investors in New York. 'This process is painful.'"

"The market for 'nonconforming' loans is 'illiquid,' Chief Financial Officer Tom Casey said."

"WaMu shares have fallen by about half this year through Tuesday, wiping out more than $18 billion of market value. 'This environment is unlike anything I have seen in my career,' said David Schneider, president of home loans."

"Killinger said home prices in California, Arizona, Florida and Nevada will face 'above-average pressure' through 2008. California is WaMu's largest home-lending market."

From Bloomberg. "Societe Generale SA, France's second- biggest bank by market value, had 375 million euros of writedowns and trading losses after record foreclosures on U.S. home loans to borrowers with poor credit histories rattled debt markets."

"Societe Generale based its writedowns on a 'worse-case forward-looking scenario' that total industry losses from subprime mortgages will reach $200 billion."

The Financial Times. "The risk of fire sales of mortgage-backed securities was rising on Tuesday after rating downgrades pushed a clutch of complex debt vehicles into default, threatening a further escalation of the turmoil caused by the subprime mortgage meltdown."

"The prospect of forced sales comes as a US Treasury-backed plan for a 'superfund' to buy up distressed mortgage securities appears to have stalled."

"Rating agencies Standard & Poor’s and Moody’s have received default notices for $5bn worth of the vehicles, known as collateralised debt obligations, giving holders of senior debt the right to sell assets."

"'The senior controlling class will typically want to get the hell out and pay themselves back, even if that means selling the underlying securities at a discount,' said Arturo Cifuentes, (a) fixed-income broker and a former Moody’s analyst."

"Executives at other banks believe the plan has been hurt by the turmoil at Citigroup, after admitting it faced further mortgage-related writedowns of up to $11bn. 'As far as we can see, it appears dead in the water right now,' said one senior Wall Street banker."

"Investors also have been worried about the health of US bond insurers, such as MBIA and Ambac, whose central role in the capital markets depends on their high credit ratings."

"Bond insurers including MBIA Inc., Ambac Financial Group Inc. and ACA Capital Holdings Inc. face 'massive losses' over the next few quarters that could test their ability to raise new capital, Egan-Jones Ratings Co. said."

"MBIA may lose $20.2 billion on guarantees and securities holdings, Sean Egan, managing director of Egan-Jones, said on a conference call today. ACA Capital may take losses of at least $10 billion; New York-based Ambac may reach $4.3 billion; mortgage insurers MGIC Investment Corp. and Radian Group Inc. may see losses of $7.25 billion and $7.2 billion, respectively, Egan said."

"Some of the debt, largely home loans issued in 2006 and early 2007, has been defaulting at record paces. The losses are threatening the AAA ratings of some of the companies' assurance units."

"'The refrain that there is little risk because a security has a high rating is no longer valid,' Egan said."

"Moody's Investors Service and Standard & Poor's will downgrade the ratings only after problems have become more obvious, Egan said. He dismissed the argument made by insurers that mark-to-market losses won't turn into realized losses."

"'You can't say that the whole market is stupid,' said Egan. 'In my opinion you can assume a slight discount for market dislocations, but it has gone far beyond that.'"

"Barclays Plc and Royal Bank of Scotland Group Plc may have to write down a combined 2.1 billion pounds ($4.4 billion) linked to subprime-mortgage securities, analysts at Sanford C. Bernstein & Co. wrote today."

"'The rumors about who has to write down how much will continue until someone has written down all the losses, at least those which are directly linked to the subprime market,' said Jochen Felsenheimer, head of credit derivatives strategy at UniCredit SpA in Munich."

"Citigroup Inc. says it isn't sure how much its subprime-related assets have fallen in value this quarter. Maybe it's $8 billion. Maybe it's $11 billion. On one point, though, Citigroup isn't budging: It says none of these declines began until after last quarter ended."

"The news from the nation's biggest bank evokes memories of the scene from the 1984 hit comedy 'Beverly Hills Cop' where Eddie Murphy's character, detective Axel Foley, hands a valet the keys to his beat-up Chevy Nova at a pricey country club he'd never visited before."

"'Can you put this in a good spot? 'Cause all of this $#@& happened the last time I parked here,' Foley said, straight-faced."

"The amount of home equity 'cashed-out' in loan refinancings plunged to its lowest level since early 2005 as tighter lending requirements and the weak housing market hampered borrowers, Freddie Mac said in a report."

"Legislation proposed by House Democrats to help about half a million homeowners avoid foreclosure could also result in 500,000 additional personal bankruptcy filings over the next two years, some experts say."

"'Why wouldn't anyone file then if they are facing foreclosure?' said Sam Gerdano, executive director of the American Bankruptcy Institute. 'I'm sure most people would consider it, and do it if legislation is passed.'"

"Federal Reserve Bank of Richmond President Jeffrey Lacker said assessing the credit market turmoil that started this summer may take more time and that the Fed did the right thing in making funds available, albeit at a cost."

"'It may be some time before we have a full understanding of this summer's events,' he said, referring to a seizing up in credit markets stemming from losses in the U.S. mortgage market."

"'My reading of the evidence is that the episode was less about liquidity than it was simply about a dramatic change in the valuation of a class of credit exposures,' he added."

"On the Fed's response to the credit market turmoil, Lacker said: 'We stood ready to lend -- on good collateral at a penalty rate -- but did not interfere with the market's assessment of risks.'"

Dow Jones Newswire. "To move inventory, Ryland is offering savings as high as 25% from Friday through Sunday. Sale markets include Las Vegas, Phoenix, Baltimore, Northern and Southern California, Denver, and Chicago. In Las Vegas, the three-bedroom 'Shasta' model is now $368,823, down from $533,823, according to Ryland's Web site."

"Florida homebuilder WCI Communities Inc. will cut another 21 percent of its work force and streamline operations as the national housing slump continues to worsen, the company said Wednesday."

"The housing sector is in the third year of a drastic slump that has left builders with a glut of unsold homes, forcing them to cut prices and take massive balance-sheet charges."

"'This prolonged downturn requires that we continue to assess our overhead and make reductions in order to remain viable through the trough of this cycle,' said CEO Jerry Starkey."

"New York Attorney General Andrew Cuomo expanded his investigation of the mortgage industry to include Fannie Mae and Freddie Mac, the two biggest U.S. providers of mortgage financing."

"Cuomo said in a statement that he plans a news conference today in New York to announce 'a significant new development in his expanding investigation into the mortgage industry involving Fannie Mae and Freddie Mac.'"

"He last week sued the real estate appraisal unit of First American Corp., the biggest U.S. title insurer, accusing it of inflating home values under pressure from Washington Mutual Inc."

"A probe by Cuomo would add to the scrutiny the companies have faced beginning in 2003 when accounting misstatements totaling $11.3 billion were revealed."

"Cuomo will on Wednesday announce that he is examining what role Fannie Mae and Freddie Mac might have played in a possible scheme to inflate appraisals of home values, said sources familiar with the investigation."

"Cuomo has subpoenaed records at the two government-sponsored mortgage finance enterprises but is not expected to name them as defendants in the suit on Wednesday, the sources said."

"Mortgage finance giant Fannie Mae, which is recovering from a $6.3 billion accounting scandal, plans to catch up on its financial reporting this week. The government-sponsored company said Monday it will release earnings reports for the first three quarters of the year on Friday -- making it current for the first time since 2004."

"Fannie Mae cautioned, however, that given the time, effort and complexity involved in preparing the financial statements, and ongoing changes in the mortgage market, 'there is no assurance" that it will file the reports on that day.'"