Some housing bubble news from Wall Street and Washington. MarketWatch, "Pulte Homes Inc.'s orders for new homes fell harder than those of peers in the latest quarter, suggesting it's offering relatively thinner price cuts and incentives, a move that could hurt the home builder later, a Wall Street analyst said. The Bloomfield Hills, Mich., company reported a wider fourth-quarter loss as new orders fell 29% from a year earlier to 4,562 units."

"The loss included $543.3 million of charges related to inventory write-downs, other land-related charges and impairment of goodwill."

"'To us, this indicates that Pulte did not respond to market trends as much as Ryland Centex, which reported order declines of 7% and 10% respectively,' wrote Banc of America Securities analysts led by Daniel Oppenheim."

"'We think this will lead to two issues: further declines in margins when they adjust pricing and more importantly, increased cancellations as buyers in backlog see the lower prices,' the report said."

"Pulte's CEO, Richard Dugas, during a conference call Thursday was cautious in his outlook for the U.S. housing market. 'For the home-building industry, the year 2007 will likely be remembered as one of the most difficult and challenging in decades,' the CEO said."

"Pulte's strategy since the third quarter of 2007 has been mothballing communities rather than selling homes at a deep discount, according to Anna Torma at Soleil Securities Group."

"'Additionally, the company announced it would reduce pricing and use incentives only in select communities where closings would lead to positive cash-flow generation,' the analyst said."

"Dugas said on the conference call that the company has more than 50 communities that are mothballed."

The Detroit Free Press. "'The question is, can they continue to convert the homes and the inventories into cash?' asked Jack Lake, an analyst at Victory Capital Management, which owns Pulte shares. 'The better they can do that, the better off they'll be.'"

"Revenue for the builder of Del Webb-brand homes for retirees declined 34% to $2.9 billion."

From Bloomberg. "MBIA Inc., the world's largest bond insurer, posted its biggest-ever quarterly loss and may raise more capital to offset a slump in the value of subprime-mortgage securities."

"MBIA posted $3.4 billion of losses from marking down the value of residential and commercial mortgages as well as CDOs that it guarantees, according to the statement."

"MBIA CEO Gary Dunton is trying to shore up capital and retain a AAA rating for the company's insurance unit by selling stock and bonds. Without the AAA stamp, MBIA's business would be crippled and ratings on $652 billion of securities would be thrown into doubt."

"Standard & Poor's yesterday said it cut or may reduce ratings on $270.1 billion of subprime-mortgage securities and 572 CDOs valued at $263.9 billion that could extend bank losses."

"'We're paying for those mistakes and I don't just mean MBIA, I mean all the monolines,' MBIA CEO Gary Dunton said on a conference call."

The Associated Press. "Fitch Ratings slashed FGIC Corp.'s financial strength rating on Wednesday, harming the bond insurer's chances of winning new business and potentially reducing the value of hundreds of billions of dollars in bonds."

"The company, which insures almost $315 billion in debt, said it had a plan to address Fitch's concerns, but Fitch said FGIC has yet to raise the cash. The plunge in the value of mortgage debt has damaged bond insurers' balance sheets because of their exposure to more defaults. FGIC reported its contracts insuring risky debt lost more than $100 million in value during the third quarter."

From Reuters. "Credit rating company Moody's Investors Service on Thursday said it raised its assumptions for losses on loans backing subprime mortgages as much as 85 percent in response to deteriorating performance."

"Average losses for loans made in 2006 -- as underwriting standards were loosened more -- will likely fall between 12 percent and 24 percent."

"'We see delinquencies still going up, not having reached a plateau,' Moody's Chief Credit Officer Nicolas Weill said. 'There are also more concerns by the Moody's economists on the potential for higher unemployment and recession' and home price declines."

"Defaults on privately insured U.S. mortgages rose 37 percent in December from the same month a year earlier, an industry report today showed."

"The number of insured borrowers falling more than 60 days late on payments jumped to a record 64,384 last month from 46,921 in December 2006, according to the Mortgage Insurance Companies of America."

"Defaults increased 5.5 percent from November, the prior high. The number of delinquent insured mortgages that returned to good standing fell to 34,813 in December from 37,137 a month earlier, according to the report."

This Is Money. "Standard Chartered could take on debts of up to $7.15bn (£3.59bn) to bail out its structured investment vehicle Whistlejacket Capital in the latest case of the credit crunch squeezing banks."

"Standard Chartered effectively committed itself to buying any of the commercial paper issued by Whistlejacket up to its total asset value of $7.15bn. The bank, which sponsors and manages the SIV, said the assets in Whistlejacket were 'high quality with very little subprime exposure indeed'."

"Whistlejacket, based in the U.K. Channel Islands, holds asset-backed securities and bank bonds with an average rating of AA, the third-highest investment-grade ranking. Less than 5 percent of Whistlejacket's assets are linked to subprime mortgages, Standard Chartered said."

"Mizuho Financial Group Inc. and Mitsubishi UFJ Financial Group Inc. reported a combined $3 billion of third-quarter losses from mortgage investments, causing profits at Japan's two biggest banks to slump."

"Mizuho had 530 billion yen in overseas residential mortgage backed securities at the end of December, of which 30 billion yen was backed by subprime mortgages, Mizuho said today. Mitsubishi UFJ had 282 billion yen in subprime-related investments at the end of the same period."

"'Mizuho didn't know the risks and followed what U.S. banks were doing,' said Edwin Merner, who oversees $1 billion as president of Atlantis Investment Research Corp. in Tokyo. 'Mitsubishi is slower at doing new things and that was fortunate this time.'"

"Japan is probably already in recession, ending the longest period of economic growth in more than 60 years, Goldman Sachs Group Inc. economist Tetsufumi Yamakawa said this week. Lending by Japan's 10 so-called city banks, including Mitsubishi UFJ and Mizuho, fell 1.7 percent in December, declining for the ninth straight month."

"Bristol-Myers Squibb Co. wrote off $275 million in investments in the quarter, which could rise to as much as $417 million, said Rebecca Goldsmith, a spokeswoman for the drugmaker."

"'Some of the underlying collateral for the auction rate securities held by the company consists of sub-prime mortgages,' the company said today in a statement. If credit and capital markets continue to deteriorate, Bristol-Myers said, it 'may incur additional impairments to its investment portfolio.'"

"A former employee of Countrywide KB Home Loans has filed a lawsuit claiming he was wrongly fired after he reported fraudulent lending practices to superiors and refused to approve mortgages for unqualified applicants."

"In the suit, Mark Zachary contended he was given an excellent performance review last February then fired three months later after he blew the whistle on fellow employees and outlined instances in which appraisers were 'being strongly encouraged to inflate homes' appraised value by as much as 6 percent.'"

"Countrywide Financial Corp., the largest U.S. mortgage lender, was subpoenaed by Florida Attorney General Bill McCollum over the company's lending practices, Bloomberg News reported."

"Bankruptcy trustees and others say they want to know if home-loan companies made false claims against bankrupt homeowners or used questionable proof to make them pay."

"The subpoena comes amid a national probe of lenders, including Countrywide, in the wake of the subprime collapse."

The Wall Street Journal. "The New York attorney general's office, pursuing an investigation into whether Wall Street firms improperly packaged and sold mortgage securities, is latching onto a powerful regulatory tool: the 1921 Martin Act."

"The state law, considered one of the most potent legal tools in the nation, spells out a broad definition of securities fraud without requiring that prosecutors prove intent to defraud."

From Fortune. "The mortgage industry has officially replaced Big Oil as Washington's favorite political punching bag."

"But before our elected officials in Congress get too preachy about the lousy lending practices that led to today's mortgage mess, first they ought to consider Congress's own role in laying the groundwork."

"The fact is, neither the expansion of the subprime market nor the proliferation of exotic interest-only or option-ARM mortgages would have been possible without federal laws passed in the 1980s."

"Says Patricia McCoy, a law professor at the University of Connecticut: 'Congress never likes to blame themselves, but in this case there's no question they bear some of the responsibility.'"

"McCoy points to two key pieces of legislation that are at the root of the current mortgage crisis: the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) and the Alternative Mortgage Transactions Parity Act of 1982 (AMTPA)."

"The former abolished state usury caps that had limited the interest rates banks could charge on primary mortgages, and, in the process, gave banks more incentive to make home loans to folks with less-than-perfect credit."

"It is AMTPA, the 1982 law, that McCoy sees as most problematic."

"Prior to the passage of AMTPA, banks were barred from making anything but the conventional fixed-rate, amortizing mortgages. AMPTA lifted those restrictions, giving birth to all the new and exotic mortgages that have so many borrowers in hot water today."

"'One of the problems was that there were no substitute regulations to make sure these new mortgages didn't turn out to be exploitative,' says McCoy."

"Much of the grief being visited upon borrowers and lenders right now could have been avoided, she contends, if Congress had required that the underwriting standards on the new, adjustable-rate loans be applied not to the teaser rates but to the maximum rates."

"All the problems that are rampant today existed on a smaller scale in the 1990s, which is why McCoy faults the 1990s Congress for not acting at that time."

"'Certainly by the late 1990s, Congress knew of the problems,' says McCoy. 'It had plenty of time over the past 10 years to do something, and it did nothing.'"