Some housing bubble news from Wall Street and Washington. CNN Money, "New construction of single-family homes fell to a 17-year low in January, according to a government report. Starts of single-family homes fell to an annual rate of 743,000 in the tenth straight monthly decline. The level of single-family home building is down 5 percent from December, 34% from a year earlier and 60% from the record high reached only two years ago."

"Building permits for single-family homes - often taken as a sign of builders' confidence and a better look at the future of the market - fell to an annual rate of 673,000. That also marked the tenth-straight month of decline for that measure and, like the single-family starts, was a 17-year low."

"A separate Census Bureau report showed a record 195,000 completed homes for sale at the end of December, the supply of all new homes available for sale, including those under construction and those not yet started, stood at a 9.6 month supply. That glut of new homes for sale is cutting into the value of both new and existing ones."

"The January level for housing starts is down an annualized 40.4% versus the fourth quarter average. This result indicates that residential investment will be a significant drag on 1Q real GDP growth, according to Gary Bigg at Bank of America Securities."

"Builders have been aggressively cutting both prices and starts of new homes but tighter mortgage lending has been working against them. 'We're not even taking in 50-60% of the people who inquire,' said Bob Munson, president of the Americana Mortgage Group."

"Even as the Fed has been cutting its target Fed funds rate, the rate on an average 30-year fixed rate loan has gone up three quarters of a percentage point, so Munson says 'I think the worst is yet to come.'"

The Associated Press. "The U.S. thrift industry on Wednesday reported a record $5.24 billion loss in the fourth quarter of 2007 - the biggest quarterly loss since federal regulators first started collecting quarterly data."

"The Office of Thrift Supervision said about $4 billion of the overall losses in the fourth quarter was tied to write-downs in the value of assets affected by the downturn in the housing industry. Another $2.2 billion loss was tied to a restructuring charge by a single institution."

"The agency also said thrifts set aside $5.1 billion in loan loss provisions, or 1.35 percent of average assets."

From The Star. "The Bank of Montreal announced it would begin 2008 with a $490 million pre-tax charge against its first-quarter earnings. It also pledged about $12 billion (U.S.) in financial support for its two struggling structured investment vehicles or SIVs."

"The bank said in November that it would provide no more than $1.6 billion for its SIVs."

"Karen Maidment, BMO's former chief financial and administrative officer, told a conference last September the bank's total exposure to structured vehicles was 'under $300 million,' both in terms of equity and liquidity."

From Reuters. "Standard Chartered on Wednesday dropped initial rescue plans for its $7 billion Whistlejacket structured investment vehicle which was forced into receivership last week, drawing criticism from analysts."

"Asia-focused bank Standard Chartered said its decision to drop the plans was the result of a number of factors including 'the pace of continuing deterioration in the market for certain asset classes.'"

"Ratings agencies had given the OK to Standard Chartered's plans to support the SIV, saying they would not affect the bank's ratings or strain its balance sheet."

"A Standard Chartered spokesman, however, played down talk of a reputational hit to the bank, saying: 'Investors in Whistlejacket are mature investors and are aware they are just caught up in current market dislocation.'"

"Neville Kahn, the partner in charge of the receivership at Deloitte, said it would be exploring all the options available for Whistlejacket."

"'That includes alternative financing, whole book solutions or holding these assets to long-term maturity,' Kahn said. 'But I can confirm that there is no need for a fire sale of the assets. Absolutely categorically no need.'"

From Bloomberg. "SIVs typically invest in asset-backed securities and bonds sold by banks and insurance companies with high credit ratings."

"Whistlejacket invested about 44 percent of its assets in financial company debt, according to Moody's Investors Service. About 20 percent is in mortgage-backed bonds and 10 percent in collateralized debt obligations, notes that pool other securities."

"Standard Chartered blamed the 'impracticality of completing any proposal within the confines of the receivership' for withdrawing its refinancing plan, in a statement today."

"A year ago $20 million would have gotten Luminent Mortgage Capital Inc. access to $640 million in loans to buy top-rated mortgage-backed securities. Now that much cash gets the firm no more than $80 million."

"'There's nobody out there trying to lend money on securities,' said Luminent CEO Trezevant Moore. Six lenders are offering five times leverage on what the San Francisco-based company has contributed, while a year ago, 20 banks extended 33 times, he said."

"'The banks themselves, because they owned so much of this different kind of affected paper ranging from leveraged loans to mortgage-backed bonds, have simply got their snoot full,' said Roy Smith, a former Goldman Sachs Group Inc. partner who teaches finance at New York University's Stern School of Business. They 'don't have their usual amount of room to step up.'"

"The ability of mortgage bond buyers such as Luminent to use leverage with their investments has diminished."

"Investors in the most senior commercial-mortgage securities could typically borrow 33 times the amount of their investment at a cost of 0.03 percentage points above the one-month London interbank offered rate in January 2007, according to a JPMorgan Chase & Co. report last month."

"At the start of this year, an investor might only be granted 10-to-1 leverage, and pay 20 basis points above Libor."

The Guardian. "Three mortgage lenders yesterday pulled the plug on deals that allow home buyers to borrow as much as 125% of a property's value - the day after Northern Rock came under fire for offering similar deals."

"Alliance & Leicester and Coventry Building Society announced within hours of each other that they were withdrawing their 125% mortgage products. Meanwhile, Abbey said a pilot scheme to test 100%-plus mortgages launched last autumn would end on Friday."

"Melanie Bien, a director at mortgage broker Savills Private Finance, said: 'The death knell for 125% loan-to-value (LTV) mortgage products was sounded when the government nationalised Northern Rock. How can the government be seen to encourage borrowers to take on such high LTVs, particularly when house price growth is slowing and prices are falling in some areas?'"

"She added that there was risk enough associated with taking on a loan that was more than 100% of the property purchase price when prices were rising, 'never mind when they are falling and the risk of negative equity is so much greater.'"

The Wall Street Journal. "Sens. Hillary Clinton and Barack Obama sparred over housing policy yesterday, revealing some differences in their approaches to economic policy."

"As the Democratic presidential candidates look to the March 4 primaries, when voters go to the polls in Ohio, a state hit hard by housing-market declines, Mr. Obama called his colleague's plan to freeze mortgage rates 'disastrous.'"

"Mr. Obama said the proposal was shortsighted because it would make lenders less willing to approve new loans or modify existing ones. 'A blanket freeze ... will drive rates through the roof,' he said."

"In regions of the country such as Ohio, where home prices are still declining, delaying foreclosure could force banks to watch home values drop further before they can seize homes."

"'Lenders are not going to recover their costs if it's in an area of declining value or high unemployment,' said Bud Carter, VP of a consulting concern that advises lenders. That could put further pressure on home values, experts say."

"Obama said Clinton's plan to freeze the monthly rate on existing adjustable rate mortgages did not target 'struggling homeowners' who need help the most."

"'It will reward people who made this problem worse but it will also reward people who are wealthy and don't need it,' Obama told a small group gathered to discuss the economy in San Antonio."

The Cherokeean. "In a campaign swing through East Texas last Friday, former President Bill Clinton...predicted that another one million 'of your fellow citizens' are facing foreclosures on homes because of the current mortgage meltdown."

"Mr. Clinton called his wife's plan the most aggressive of any of the candidates running for president. 'She wants to freeze monthly payments for 90 days, and give $30 million to states,' in order to implement a bailout plan."

"'We'll tell the mortgage companies: you eat 20 percent, we (the government) will eat 20 percent, you won't foreclose on these people,' he said. 'When you're in a hole, you quit digging.'"

"For months, we've fretted about the Armageddon that will hit when subprime adjustable rate mortgages start resetting to much higher interest rates. What's happening is even worse: Many of these loans are defaulting well before their rates increase."

"Defaults for subprime loans issued in 2007 - none of which have reset yet - hit 11.2 percent in November. That represents perhaps 300,000 households, and is twice the default rate that 2006 loans had 10 months after being issued, according to Friedman, Billings Ramsey analyst Michael Youngblood."

"Many borrowers were approved for mortgages that they had little chance of affording, even at the low-interest teaser rates. 'I was rather shocked by the characteristics of the 2007 loans,' said Youngblood."

"These mortgages were doomed from the start. For instance, in both 2006 and 2007, well over 40 percent of subprime borrowers were awarded mortgages with either little or no documentation of their ability to pay."

"And even when borrowers did go on the record about their earning power, it didn't bode well. Both 2006 and 2007 saw a large proportion of loans with high debt-to-income ratios (DTI), which indicates the percentage of gross income required to pay debt. In 2007 subprime originations, the DTI hit 42.1 percent, up from 41.1 percent in 2006. Borrowers were simply taking on more debt that they could afford."

"By late 2006, lenders knew that the housing market was heading south. And home prices began to drop. But instead of cutting back on risky loans, lenders kept lending. Why?"

"'Because investors continued to buy the loans,' said Doug Duncan, chief economist of the Mortgage Bankers Association."

"Despite their quality, subprime mortgages were as profitable as any other for lenders like Countrywide and Wells Fargo, who were able to quickly securitize the loans and sell them in the secondary market. The loans sold easily because they carried the promise of high yields."

"'As long as you could sell the loan, you made the deal,'" Duncan said."

"And, to outside analysts, there appeared to be nothing wrong with loan quality. 'There were very few overt changes in industry underwriting guidelines,' said Youngblood. What did change, he said, was that lenders made more exceptions to their standard practices, approving people with poor work histories or insufficient proof of income."

"'These exceptions generally amounted to no more than 5 percent [of subprime loans] before 2006,' said Youngblood, 'but they represented the majority of these loans issued in 2006 and 2007.'"

The Shelby Star. "With foreclosures skyrocketing, it’s hard to imagine that half the homeowners who stand to lose their homes through the process don’t try to stop it."

"But according to Tim Adams, Mid-Atlantic District Director for NeighborWorks America, one out of every two homeowners who face foreclosure makes no effort to stop it."

"'You have to reach out and make a call,' Adams said. 'The banks don’t want to be in the real estate business. They would rather be in the lending business.'"

The Coloradoan. "One pocket of Larimer County is seeing foreclosure sales four times higher than the county average. Glacier View Meadows, a 5,000-acre mountain subdivision 35 miles northwest of Fort Collins, has suffered the last two years with rising foreclosure rates."

"Forty percent of the 35 homes sold in Glacier View last year were either bank-owned sales or short sales, according to records compiled by Steve Koeckeritz of Lone Pine Realty."

"Already this year, with 34 homes on the market in Glacier View, nine are being sold by the banks that foreclosed on the mortgages, Koeckeritz said. Many of the homes sold at auction last year were modulars and priced under $230,000, which is in the lower half of market for Glacier View homes, Koeckeritz said."

"The subprime debacle, rising commuting costs and a sluggish manufactured home market have all contributed to the problem, Realtors say. Others walked away from their homes when they didn't sell for the asking price, said Bob Isaacson, Realtor with Ponderosa Realty Associates, which has an office in Glacier View."

"'They set their expectations way too high. They see their home is not going to sell and they won't take less and just say goodbye or go somewhere else. Foreclosure doesn't seem to bother them,' he said."

"Steve Horsmon, president of the Glacier View Association, said the people going through foreclosure are primarily second-home owners who got in trouble with increasing gas prices, the long commute to Fort Collins and the cost of mountain living."

"'It got unmanageable, and they walked away,' Horsmon said."