Some housing bubble news from Wall Street and Washington. Reuters, "An estimated 2.5 billion euro ($3.59 billion) writedown at French bank Credit Agricole raised fresh concerns among analysts on Friday over Agricole's risk management and investment banking arm. France's biggest retail bank said late on Thursday the writedown related to super-senior collateralised debt obligations and took into account a decision by ratings agency Standard & Poor's to cut to junk status the rating on bond insurer ACA Financial Guaranty Corp."

"Credit Agricole added that its Calyon investment bank would have 'negative results' for 2007. CM-CIC Securities estimated Calyon's annual loss at 400 million euros, while JP Morgan put it at 154 million."

From PR Newswires. "Impac Mortgage Holdings, Inc. reports third quarter 2007 net loss of $1.2 billion for the third quarter 2006. The net loss was primarily the result of a $789.4 million provision for loan losses as a result of deteriorating market conditions, higher delinquencies and higher severities."

"Nomura Holdings Inc, Impac Mortgage Holdings Inc and Bear Stearns Cos Inc last year issued the worst-performing securities backed by so-called 'Alt-A' mortgages, Standard & Poor's said on Thursday."

"Severe delinquencies on the $4 billion in Alt-A mortgage bonds issued by Nomura hit 9.83 percent as of September, more than twice the 4.61 percent average, the report said."

"Poor performance of loans in U.S. mortgage bonds 'at first seemed limited to the subprime mortgage sector, but has since filtered through to virtually every corner of the non-prime mortgage industry,' S&P said in the report."

"Impac's $6.6 billion 2006 Alt-A loans are 8.31 percent delinquent, while 7.13 percent of Bear Stearns' $46.7 billion in Alt-A issuance are more than 90 days in arrears, S&P said. Morgan Stanley and Deutsche Bank AG round out the worst five, with 6.95 percent and 6.32 percent, respectively."

Business News Americas. "Puerto Rico's Popular, parent of the island's largest bank of the same name, will report a pre-tax loss of US$90mn-165mn for the fourth quarter this year due to charges stemming from accounting changes. Popular said it would have to reclassify 21 mortgage loans held in securitization trusts that do not qualify for sale accounting treatment, resulting in a US$20mn-95mn charge for the fourth quarter."

"The move will reduce Popular's US$3.1bn subprime mortgage portfolio by around US$2.4bn."

"Coupled with this, a US$175mn impairment charge on the goodwill and trademark value of Popular's E- LOAN subsidiary will lead to net loss in 2007. 'The restructuring and scaling back of E-LOAN reflects the realities of the market as well as management's focus on reducing underperforming businesses,' Fitch analyst Joseph Scott told BNamericas."

The St Paul Business Journal. "U.S. Bancorp is taking a $325 million hit in the fourth quarter over litigation involving Visa and for troubled money-market funds stung by the subprime crisis, the company announced Friday. Recent guidance from the Securities and Exchange Commission required U.S. Bancorp and similarly situated banks to take the write-down."

"U.S. Bancorp will also recognize a $110 million charge for asset-backed securities it purchased from rated money-market funds managed by its mutual-fund unit, FAF Advisors."

"In the fall, U.S. Bancorp said it would prop up the troubled $18 billion money-market fund First American Prime Obligations Fund if necessary. The fund spun off or restructured some of its securities that were collateralized by mortgages, credit-card receivables and auto loans, among other things."

The Associated Press. "KeyCorp said Thursday that it expects to post a fourth quarter loss as the Midwest regional bank sets aside additional reserves for loan losses and eliminates 1,040 jobs. KeyCorp said it expects to report net loan charge-offs of $110 million to $120 million, fixed-income losses of $55 million to $65 million, and layoff expenses of $26 million for the fourth quarter."

"KeyCorp said the loan charge-offs are because of deteriorating market conditions in its residential portfolio, primarily in Florida and California. It also said it will no longer make loans to real estate developers outside of the 13-state region where it does business and also will stop making most home-equity loans out of the region."

"It has transferred approximately $1.1 billion of homebuilder-related loans and $800 million of condominium exposure to its special asset management group."

From CNN Money. "First Horizon National Corp. expects its mortgage business to lose money in the fourth quarter as sinking property values handcuff borrowers' access to cash. First Horizon, which runs about 600 branches, expects to set aside an additional $150 million in anticipation of unpaid loans."

"This provision prepares for defaults from residential developers that borrowed money to buy properties in Florida, California, Virginia, Georgia and Nevada."

"Because this real estate is losing value in the midst of a protracted housing slump, these borrowers are not able to tap their properties for as much cash and are thus more likely to default on their loans."

"First Horizon expects to record a $70 million 'goodwill adjustment' to its mortgage business for the fourth quarter."

The Honolulu Advertiser. "Financial difficulties deepened yesterday for the owner of the Turtle Bay Resort. A $283 million mortgage foreclosure lawsuit was filed against Kuilima Resort Co. in state court by international lender Credit Suisse. The suit seeks to foreclose on the resort property because of delinquent principal and interest payments."

"Kuilima Resort has been looking for a buyer or a development partner since June 2006 to help finance the expansion of the 880-acre Turtle Bay Resort that would add up to five new hotels with 3,500 rooms and condominium units, as well as four public parks."

The Financial Times. "The investments are off-balance sheet, their underlying assets have plunged in value, and their risks are difficult to quantify. Sound familiar? Many structured investment vehicles would fit that bill. But so would the hundreds - perhaps thousands - of opaque joint ventures formed in the past 15 years by US homebuilders."

"The proliferation of complicated JVs by some builders, including KB Home, Centex, and particularly Lennar, is now depressing their share prices and scaring off buyers of distressed land holdings. The top 15 public builders have taken $16.5bn in writedowns since the start of 2006. Of that, $1bn stemmed from JVs according to Standard & Poor's."

The Columbus Dispatch. "Dominion Homes' president and chief operating officer, Jeffrey Croft, will leave the company at the end of the year, the company announced. The Dublin homebuilder also announced that it's out of compliance with Nasdaq Stock Market rules and risks being delisted next year."

"U.S. regulators, led by the Securities and Exchange Commission, are probing how financial firms priced mortgage securities on their books and whether they should have told investors earlier about the declining value of those securities, The Wall Street Journal reported on Friday."

"The SEC has set up a working group to tackle some three dozen probes, which are in their early stages, the article said."

The Wall Street Journal. "'As in most investigations, the issue comes down to what did people know and when did they know it,' said Mark Schonfeld, director of the SEC's New York office."

"Barclays' lawsuit against Bear Stearns is not the first claim to emerge from the wreckage of the US subprime mortgage market. However, the fact that a large UK bank is prepared to go public with its case against a Wall Street securities house suggests that some epic legal battles might arise from the past six months of market turmoil."

"The lawsuit, filed in New York on Wednesday night, comes after Barclays was a victim of the collapse of a Bear Stearns-managed hedge fund that invested heavily in complex subprime securities."

"Barclays is understood to have spent several months in high-level discussions with Bear Stearns before deciding to press ahead with its claim. Given the scale of losses suffered by banks and investors as a result of the subprime collapse, the Barclays lawsuit may well be the first of many."

From Marketplace. "Scott Jagow: 'For a while, I was telling you every day about a huge bank loss because of bad mortgage debt. Now, it seems there's a big foreign investment in one of those banks every day. This morning, it's Merrill Lynch. The Wall Street Journal says the bank might get $5 billion from the Singapore government.'"

"'At the same time, we've learned the identity of a mystery investor in the Swiss bank UBS. It's Saudi Arabia, according to The Financial Times. UBS shareholders are not happy with this deal.'"

"Haig Simonian, who covers UBS for the Financial Times: 'I think shareholders are probably resigned to the fact that the bank needs extra capitol. But shareholders are upset because in bringing in these new investors (is) to the disadvantage of existing shareholders. So in other words, your shares aren't going to be as valuable as they were before, because new shareholders are coming in and taking very big stakes.'"

"Simonian: The problem in Switzerland with UBS isn't nationalistic, it's not protectionism. It's more I think UBS shareholders had believed until now that their bank was, I don't know, the real blue chip in the pack, one of the world's best-run banks which had a reputation for being extremely risk-adverse. Suddenly, it turns out in a matter of months that that institution run up $40 billion worth of subprime portfolios doing their business.'"

From Bloomberg. "When California homeowner Christopher Aultman stopped writing mortgage checks, Charles Prince of Citigroup Inc. paid."

"Some of the $16.6 billion that Prince's New York-based bank estimates it lost on wrong-way subprime bets flowed to investors who for the first time were able to wager that U.S. mortgages would collapse."

"'These structured products were crazy profitable for Wall Street until they blew up,' says Randall Dodd, senior financial sector expert for the International Monetary Fund in Washington. 'Ultimately it's about excessive risk-taking and greed.'"

"The hedging offered by derivatives made investors feel invulnerable, says Paul Kasriel, chief economist at Northern Trust Co."

"'Derivatives don't reduce risk, they shift risk,' Kasriel says. 'The development of the derivatives market enabled investors to shift risk at a lower cost, and that encouraged them to take on more risk.'"

"Many of those responsible for the economic upheaval caused by subprime derivatives have also been its victims."

"Mortgage salesmen peddled loans 'based on the borrowers' ability to refinance rather than the borrowers' ability to repay,' said David Einhorn, co-founder of Greenlight Capital LLC...and a former director of New Century Financial Corp., the second-biggest subprime lender in 2006."

"Daniel Sadek, who says his Costa Mesa, California, subprime lender Quick Loan Funding catered to borrowers with credit scores as low as 420 out of 850, had to close shop in August when Citigroup cut the company's $400 million credit line."

"'I'm surprised they went under,' says borrower Kathy Cleeves of Tenino, Washington. 'They made a fortune off us.'"

"Morgan Stanley, the second-biggest U.S. securities firm, wrote down $9.4 billion in mortgage-related investments this week."

"'Our assumptions included what at the time was deemed to be a worst-case scenario,' Chief Financial Officer Colm Kelleher said on Dec. 19. 'History has proven that that worst- case scenario was not the worst case.'"

"Sadek's Quick Loan Funding had 700 employees at its 2005 peak. Now Sadek is making payments on three residential properties he mortgaged in a failed attempt to keep his firm afloat."

"'I'm under water,' he says. 'I'm trying to sell everything, and nothing is being sold.'"

"Skyrocketing foreclosures are a testament to how easy it was to borrow from mortgage lenders in recent years."

"It may also have been easy to steal from them, to judge from a multimillion-dollar fraud scheme that federal prosecutors unraveled here in Atlanta. The criminals obtained $6.8 million in mortgages from Bear Stearns Cos., including a $1.8 million mortgage to Calvin Wright, a New Yorker who told the investment bank that he and his wife earned more than $50,000 a month as the top officers of a marketing firm."

"Mr. Wright submitted statements showing assets of $3 million, a federal indictment alleged. In fact, Mr. Wright was a phone technician earning only $105,000 a year, with assets of only $35,000, and his wife was a homemaker."

"The palm-tree-lined mansion they purchased with Bear Stearns's $1.8 million recently sold out of foreclosure for just $1.1 million."

"In 2006, losses from fraud could total a record $4.5 billion, a 100% increase from the previous year, says Arthur Prieston, chairman of the Prieston Group, which provides lenders with mortgage-fraud insurance and training."

"'We've created a culture where a great many people know how to take advantage of the system,' says Mr. Prieston."

"It didn't take a rocket scientist to steal a fortune from mortgage lenders in recent years. That much is clear from the Atlanta scheme. It was perpetrated in large part by a 23-year-old college dropout named Gregory Jerome Wings Jr., aka G-Money."

"His accomplices included a young nightclub owner, along with the director of an underground documentary called 'Crackheads Gone Wild,' a cautionary tale about drug addiction."

"Recruited into the scheme by an acquaintance in Atlanta, Mr. Wright, with the help of ring leaders, diverted hundreds of thousands of dollars from that Bear Stearns mortgage to himself, to Mr. Wings and to others in the scheme, according to a federal indictment."

"In the very same week, Mr. Wright obtained a $1.9 million mortgage on a second value-inflated mansion near Atlanta, this time from BankFirst."

"'It was so easy, it's incredible,' says Akil Secret, attorney for Mr. Wright, who has pleaded guilty to bank fraud and is awaiting sentencing."

"Particularly illuminating was the testimony of Lucy Lynch, a former VP of mortgage operations at BankFirst. 'Fraud was not really a consideration in our world,' Ms. Lynch testified, according to a trial transcript."

"Asked in court why the pattern of payouts didn't raise any red flags, Ms. Lynch responded: 'Do you have any idea how many loans came into BankFirst during that time period?' She said BankFirst typically allowed a '15-minute window' from the time it received closing documents by fax to the time it released the loan proceeds to the borrower."

"In the neighborhoods where the Atlanta scheme operated, values have plummeted. Many homes associated with the scheme are now in foreclosure. Some have sold for as low as 50% of what buyers in the fraud ring paid."

"'The banks are getting more and more aggressive in their pricing because they don't want to own these homes,' says Warren Lovett, a real estate agent with Coldwell Banker in Atlanta."

"Mr. Lovett has taken listings for about 60 foreclosed properties this year. He estimates that half of the foreclosures he's encountered are due to fraud."