Some housing bubble news from Wall Street and Washington. Reuters, "Home builder Standard Pacific Corp reported sharply higher losses amid a downturn in the U.S. housing market and said conditions will likely worsen. Fourth-quarter home-building revenue fell 20 percent from a year earlier as new home deliveries fell 23 percent. Net new orders for the quarter fell 11 percent to 1,002 new homes. Prospective buyers canceled their orders at a rate of 37 percent, down from 44 percent in the year-ago quarter."

"'As we enter 2008, we anticipate that housing market conditions will continue to weaken, resulting in a decrease in companywide deliveries,' CEO Stephen Scarborough said in a statement."

The Associated Press. "The latest quarter included $433.5 million in charges to write down the value of inventory and land deposits. If Standard Pacific does not improve its net worth, the lenders could declare the company in default and force the early repayment of debt."

"Standard Pacific plans to build fewer homes and acquire less land in 2008 as it sells existing inventory."

The Review Journal. "Focus Property Group, one of the largest developers in Southern Nevada, has stopped making interest payments on $500 million in loans secured by 4,800 acres in the Las Vegas Valley, Pahrump and Victorville, Calif., company executives said."

"The company said 2,100 acres of the land involved is in metropolitan Las Vegas, 1,700 acres in Pahrump and 1,000 in Victorville. The company started notifying lenders late last week that it would not make its February interest payments."

"Chairman and CEO John Ritter's company developed the land for home builders and, to a lesser extent, shopping center developers. 'We haven't sold a piece of single-family residential (land) since early 2005,' Focus Chief Operating Officer Tom DeVore said."

"Ritter believes his company owns more raw land than any other entity in the Las Vegas area except The Howard Hughes Corp. Ritter has made news in recent years by buying large chunks of land from the Bureau of Land Management at auctions."

"Ritter had been flying under the development radar until November 2002 when he outbid Olympia Group at a Bureau of Land Management auction, paying $160 million for nearly 1,000 acres...in the southwestern Las Vegas Valley."

"He bought 485 acres of BLM land for Providence in the northwestern valley for $113 million in 2003 and raised the bar for land prices in 2004 when he paid $557 million for 1,940 acres in Henderson."

"Ritter called the current real estate market conditions the worst he has seen in 26 years in the business. 'In almost all categories of real estate, liquidity has dried up,' Ritter said."

From Bloomberg. "GMAC LLC, the auto and mortgage lending company 49 percent owned by General Motors Corp., posted a fourth-quarter loss as bad loans in the U.S. rose to a record. GMAC is talking to buyers for parts of the Residential Capital mortgage unit, which had a $921 million loss. The unit lost $4.3 billion for the full year."

"ResCap's loss stemmed from a higher provision for bad loans, fewer new mortgages and markdowns on the value of securities and loans held for sale."

"GMAC bought $740 million of ResCap debt during the quarter to bolster the unit's capital. Moody's downgraded ResCap's senior debt today. The ratings company's statement cited lower liquidity, the risk that ResCap's net worth could fall below its minimum net worth covenant if GMAC doesn't provide more support, and 'Moody's belief that ResCap's franchise is impaired.'"

"GMAC said it may still sell all or part of ResCap, after reducing riskier lending and announcing 5,000 job cuts. 'We've taken painful and appropriate impairments and reserves throughout the year to set things right,' Chief Financial Officer Robert Hull said on a conference call. 'We know (2008) will be another challenging year for us, and may call for further aggressive tactics.'"

"ResCap is the second-largest independent U.S. mortgage lender after Countrywide Financial Corp, and the nation's eighth-largest mortgage lender overall, according to the newsletter Inside Mortgage Finance."

"Fourth-quarter mortgage volume at ResCap fell 58 percent to $20.8 billion, including declines of 83 percent in high-quality U.S. home-equity loans and 99 percent in U.S. subprime loans."

From AFP News. "Industrial and Commercial Bank of China has set aside six times more than previously for a potential write-down of its subprime-related assets, state media reported Monday."

"ICBC has set aside around 360 million dollars, more than six times the 429 million yuan (58.8 million) disclosed in its financial results for the third quarter ending September, analysts said."

"'They have done this out of caution and to reflect the decrease in market valuation (of these assets),' said Zhang Xi, Beijing-based analyst with Galaxy Securities."

"Fitch Ratings may downgrade all of the $220 billion of collateralized debt obligations it assesses that are based on corporate securities because of rising losses."

"The company may lower the notes by as much as five levels after failing to accurately assess the risk of debt that packages other assets, according to guidelines proposed by Fitch today. Ratings firms are responding to criticism that they failed to react quickly enough as increasing defaults on subprime mortgages in the U.S. caused a plunge in the value of CDOs."

"Buying and selling of collateralized debt obligations based on mortgage bonds, high-yield loans or preferred shares has ground to a near-halt, traders said at the securitization industry's largest conference."

"'We're definitely in a period of very low liquidity at the moment, which has actually been dropping precipitously in the last few weeks,' Ross Heller, an executive director at JPMorgan Securities Inc., said yesterday during a panel discussion at the American Securitization Forum's annual conference in Las Vegas. 'It's a challenging time.'"

"Merrill Lynch & Co., the New York-based securities firm with a record loss last year amid writedowns on the most-senior AAA pieces of mortgage CDOs it underwrote, 'has been actively talking to people' about purchasing its super-seniors, said Brian Carosielli, a managing director."

"Investors with experience with residential-mortgage assets have been buyers, paying in the 'mid-teens to low 30' cents on the dollar for the senior-most, or super-senior, classes of CDOs comprised of low-rated asset-backed bonds, he said."

From MarketWatch. "Banks are raising their credit standards for mortgages, consumer loans and commercial real estate loans at a pace never seen in the 17-year history of the Fed's quarterly survey of senior bank loan officers, the Federal Reserve reported Monday."

"Banks are requiring more disclosures, more collateral and a higher interest rate before approving loans, the survey said. Demand is plunging for many types of loans, especially for residential mortgages and commercial real estate loans."

"More than 80% of banks - the largest percentage ever -- said they had tightened lending standards for commercial real estate loans in response to a weaker economy. Nearly 60% of the banks reported falling demand for commercial real estate loans, and 87% expect the quality of such loans already made to worsen."

"More than half of the banks tightened their standards for prime mortgages, by far the highest percentage in the 17-year history of the survey. Seventy percent expected the quality of prime mortgages to worsen."

"More than 80% of the banks tightened their standards for nontraditional loans, including jumbo loans and other loans that do not conform to standards set by Fannie Mae and Freddie Mac. A similar percentage expected more delinquencies."

"For subprime mortgages, about 70% of banks that offer such loans had tightened their lending standards, but more than 90% of the banks responding to the survey said they do not offer any subprime loans."

The New York Post. "Perhaps the greatest scandal of the mort gage crisis is that it is a direct result of an intentional loosening of underwriting standards - done in the name of ending discrimination, despite warnings that it could lead to wide-scale defaults."

"From the current hand-wringing, you'd think that the banks came up with the idea of looser underwriting standards on their own, with regulators just asleep on the job. In fact, it was the regulators who relaxed these standards - at the behest of community groups and "progressive" political forces."

"In the 1980s, groups such as the activists at ACORN began pushing charges of 'redlining' - claims that banks discriminated against minorities in mortgage lending. In fact, minority mortgage applications were rejected more frequently than other applications - but the overwhelming reason wasn't racial discrimination, but simply that minorities tend to have weaker finances."

"Yet a 'landmark' 1992 study from the Boston Fed concluded that mortgage-lending discrimination was systemic." "That study was tremendously flawed - a colleague and I later showed that the data it had used contained thousands of egregious typos, such as loans with negative interest rates. Our study found no evidence of discrimination."

"Yet the political agenda triumphed - with the president of the Boston Fed saying no new studies were needed, and the US comptroller of the currency seconding the motion."

"No sooner had the ink dried on its discrimination study than the Boston Fed, clearly speaking for the entire Fed, produced a manual for mortgage lenders stating that: 'discrimination may be observed when a lender's underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants.'"

"Some of these 'outdated' criteria included the size of the mortgage payment relative to income, credit history, savings history and income verification." "Instead, the Boston Fed ruled that participation in a credit-counseling program should be taken as evidence of an applicant's ability to manage debt."

"Flexible lending programs expanded even though they had higher default rates than loans with traditional standards. On the Web, you can still find Community Reinvestment Act loans available via ACORN with '100 percent financing . . . no credit scores . . . undocumented income . . . even if you don't report it on your tax returns.'"

"Credit counseling is required, of course."

"Ironically, an enthusiastic Fannie Mae Foundation report singled out one paragon of nondiscriminatory lending, which worked with community activists and followed 'the most flexible underwriting criteria permitted.'"

"That lender's $1 billion commitment to low-income loans in 1992 had grown to $80 billion by 1999 and $600 billion by early 2003. Who was that virtuous lender? Why - Countrywide, the nation's largest mortgage lender."

"This damage was quite predictable: 'After the warm and fuzzy glow of 'flexible underwriting standards' has worn off, we may discover that they are nothing more than standards that lead to bad loans. . . these policies will have done a disservice to their putative beneficiaries if . . . they are dispossessed from their homes.' I wrote that, with Ted Day, in a 1998 academic article."

"Sadly, we were spitting into the wind. These days, everyone claims to favor strong lending standards. What about all those self-righteous newspapers, politicians and regulators who were intent on loosening lending standards?"