Some housing bubble news from Wall Street and Washington. Associated Press, "IndyMac Bancorp Inc. reported the first annual loss in company history Tuesday and scrapped its dividend to shore up capital. The holding company for IndyMac swung to a fourth- quarter loss as weakness in the housing market forced the mortgage lender to boost its loan-loss provisions to account for growing defaults and foreclosures."

"The company's credit costs soared to $863 million during the quarter, up from $46 million in the prior-year period. At the close of the quarter, credit reserves for future losses totaled $2.4 billion, up 71 percent from $619 million a year earlier."

"The Pasadena, Calif.-based company took $179 million in write-offs during the quarter and noted it expects its credit reserves to be sufficient to absorb a 'significant' increase in charge-offs this year."

The New York Times. "IndyMac, which describes itself as the second largest independent mortgage lender in the nation, finally suspended its common stock dividend today, three months after it was cut in half."

"Here’s a headline from a slide: '$555 Million Or 90% Of 2007 Net Loss Came From Home Equity, Subprime, Conduit And Builder Construction Lending… All Have Been Discontinued.'"

"I am struck by C.E.O. Michael Perry’s letter to shareholders, in which he tries to deflect blame for the mess his industry is in: 'All home lenders, including Indymac, were a part of the problem, and, as Indymac’s CEO, I take full responsibility for the mistakes that we made. However, objective reviewers of this mortgage crisis understand that home lenders and mortgage brokers were not the only ones responsible.'"

"'Systemic problems in our secondary mortgage markets and credit markets, and our government’s over-stimulation of the housing market via monetary and tax policies (the capital gains tax break on home sales encouraged speculation), were all major factors that contributed to the problem.'"

"'Indymac and most home lenders were not 'greedy and stupid.' Most of us believed that innovative home lending served a legitimate economic and social purpose, allowing many US consumers to be able to achieve the American dream of homeownership … and we still do.'"

From Bloomberg. "'2007 was a terrible year for our industry, for IndyMac and for you, our owners,' Perry said in the letter to shareholders. The housing slowdown may be 'the longest and deepest since the Great Depression,' he said."

From AFP News. "Swiss banking giant Credit Suisse, Switzerland's second largest, reported net profit of 8.55 billion Swiss francs (5.34 billion euros, 7.8 billion dollars), even after writing off 3.5 billion euros for the second half of the year."

"The bank said it had written down another 1.3 billion francs in commercial mortgage-backed assets and leveraged finance in the fourth quarter. Such exposure had already forced it to write down 2.2 billion francs in the three months to September."

The Pioneer Press. "MoneyGram International is getting a big bailout. An investment group led by private equity firm Thomas H. Lee Partners and Goldman Sachs & Co. will invest $710 million in St. Louis Park-based MoneyGram for an equity stake of about 63 percent."

"The transaction, the timeline for which has not been set, must first be approved by shareholders."

"The bailout money will go toward covering losses of more than $1 billion in MoneyGram's investment portfolio. That portfolio invests money deposited by consumers in the company's check and money-order business and was heavily weighted in bonds backed by risky subprime mortgages and collateralized debt obligations."

"In mid-January, total losses in the portfolio stood at about $1 billion. That total is growing as the company continues to sell of assets in the portfolio. MoneyGram incurred another $380 million charge in connection with the sale of $1.8 billion in securities in the portfolio as of Feb. 11, the company said in a press release Tuesday."

"MoneyGram also said it expects total losses in the portfolio to be less than $1.7 billion. A few weeks ago, the company said losses wouldn't exceed $1.5 billion."

"'Things have deteriorated in the past few weeks since the deal was proposed,' said Mark Henneman of St. Paul-based Mairs and Power, a large investor in MoneyGram."

From Reuters. "Moody's Investors Service on Tuesday slashed its ratings on Standard Chartered's $7 billion Whistlejacket structured investment vehicle (SIV) after a plan to provide liquidity fell through."

"Deloitte also said on Tuesday it had been appointed as receiver for the SIV, a step Standard Chartered was forced to take after the vehicle breached triggers that meant it had to be wound down."

"In a sign of how severe the market pressures on these vehicles have become, Moody's said Whistlejacket's capital value -- a measure of how much the riskiest debt issued by Whistlejacket is worth -- had plummeted to 41 percent from 55 percent in just four trading days between Feb. 6 and Feb. 11."

"The risk of bond insurers MBIA Inc. and Ambac Financial Group Inc. defaulting rose after billionaire Warren Buffett offered to assume responsibility for $800 billion of municipal debt, excluding subprime-linked securities."

"'It's taking away their cash cow and leaving them with the toxic waste,' said Tim Backshall, chief strategist at Credit Derivatives Research LLC."

"The cost of protecting corporate bonds from default reached a record for a third day. Traders speculated credit losses will widen after American International Group Inc. said faulty accounting caused a bigger- than-expected drop in its holdings."

"AIG, the world's largest insurer by assets, said auditors found 'material weakness' in the way it accounted for credit- default swaps and that the value of its investments fell $4.88 billion, four times more than previously disclosed for October and November."

"'We're in kind of uncharted territory for accountants in a lot of these products,' said Ricardo Kleinbaum, a credit analyst at BNP Paribas SA in New York. 'Internally, all financials are grappling with this issue of how to value.'"

"The disclosure stunned Wall Street and raised concern that other companies could report similar problems related to instruments known as credit default swaps. The news sent A.I.G. stock tumbling."

"'We are going to see more and more problems come to light like this,' Lynn E. Turner, a former chief accountant at the Securities and Exchange Commission, told The New York Times. 'This is an indication that these large financial institutions do not have the risk management systems in place to give us accurate data.'"

The Insurance Journal. "In early November, AIG President and CEO Walter Sullivan told Wall Street that the company could handle its mortgage exposure and that it was 'highly unlikely' that AIGFP would be required to make payments with respect to these derivatives."

"'While U.S. residential mortgage and credit market conditions adversely affected our results, our active and strong risk management processes helped contain the exposure,' he said at the time."

"But according to Fitch Ratings, AIG has 'relatively large exposure to the current U.S. residential mortgage crisis.'"

"AIG sold credit default swap contracts to holders of collateralized debt obligations, or CDOs. These contracts pay when there are defaults on the underlying debt. Fitch said that AIG had $505 billion in exposure to its credit derivative portfolio in late September, including $62.4 billion of CDOs backed by subprime mortgages."

"Norway announced new rules on Tuesday restricting retail investor access to complex instruments like structured bonds and immediately drew criticism from across the financial sector. Under the new rules, financial advisers will have to check whether retail clients comprehend the risks of the investments involved."

"The change comes after four Norwegian municipalities lost millions of dollars on highly-leveraged structured bonds last year due to the U.S. subprime crisis, which stoked a public debate about the ability of non-professional investors to gauge financial risk."

"'We presume that it will be very seldom that structured products will fit non-professional investors,' said Eystein Kleven, a senior official at the financial supervisory authority Kredittilsynet, which published the rules."

"'In practice, it will be very difficult for intermediaries to explain how they could sell such products to non-professional investors, especially to households,' he told Reuters."

From MarketWatch. "PMI Group Inc. will stop insuring mortgages with high loan-to-value ratios next month as the company adjusts to the U.S. housing crisis, according to a regulatory filing by the company."

"In its filing on Monday, PMI, one of the largest mortgage insurers, said in the filing that on March 1 it will stop covering home loans with loan-to-value ratios of more than 97%."

"The nation's leading mortgage insurer, MGIC Investment Corp., plans to limit its exposure to weaker housing markets by demanding higher credit scores and larger down payments."

"Starting March 3, the company said it will require at least 5 percent down on homes in so-called restricted markets. They include the entire states of Arizona, California, Florida and Nevada and major metro areas such as Washington, D.C., Detroit, Chicago, Boston and Atlanta."

"Homeowners hoping to insure condos will have to put down 10 percent."

"In January, the company instituted other changes to limit coverage of higher risk loans and borrowers with poor credit. The company had said it was limiting business in Florida and California, but the latest announcement greatly expands that."

"MGIC stopped insuring loans for borrowers with credit scores below 575 last month. It estimates its average FICO credit score for new loans is about 700, out of a possible 850."

"More than 30 percent of U.S. homeowners who bought in the last two years owe more on their mortgage than their house is currently worth, a housing market research company said on Tuesday."

"Of home buyers in 2006, 39 percent of those with a median 10 percent down payment now have negative home equity similar to 30 percent of those who purchased in 2007, said online company Zillow in its quarterly home value report."

"'With consecutive declines over the past five quarters, we haven't seen the housing market bottom yet, and it may very well get worse before things get better,' said Stan Humphries, Zillow VP of data and analytics."

"'Even many markets that have been largely insulated from recent declines, like some in the Pacific Northwest, reported notable value declines in the fourth quarter,' he added."

"A growing share of home sales are from foreclosures, especially in states hardest hit by the housing bust. In some parts of California lately, nearly 50 percent of home sales come from foreclosed houses."

"The trend, which is putting additional downward pressure on home prices, is most notable there and in Nevada, Colorado, Tennessee and Michigan, but is also evident in Ohio, Georgia, Florida and Arizona, according to an Associated Press comparison of 2007 sales and foreclosure data."

"'There is a real complacency, or an under-appreciation of how bad this is,' said Ramsey Su, an investor and former real estate broker in San Diego who regularly combs through the local sales database to asses the impact of foreclosure sales."

"Thomas Blanchard, who sells bank-owned properties in Las Vegas, said the trend has accelerated the past two months, and he estimates that 60 percent of properties on the market there are in foreclosure."

"'The only people that you have in our market here in Las Vegas are the people that have to sell,' Blanchard said."

"Alejandro Diaz-Bazan, who sells foreclosed properties in Miami, said banks seeking to unload foreclosed properties are looking for buyers that can close deals quickly, and therefore need to have a hefty down payment."

"'The bank really is out to move them, to liquidate them,' Diaz-Bazan said. Despite the downward pressure on prices, he said, 'property prices in Miami have not dropped enough' for the market to rebound."

"Growing scrutiny into subprime mortgages has failed to stop unscrupulous lending practices to blacks, Hispanics and other minority groups, U.S. Rep. Barney Frank said on Monday."

"Innovation in products and practices must be fostered, but regulation is needed to stem potential abuses, he added."

"Frank also said it was wrong to turn owning a home into one of Americas' biggest dreams."

"'I wish everyone in America earned enough money and had enough sense to own a home,' Frank said, adding however that many people are pushed into improperly buying one instead of renting."

"'Home ownership is a good thing but Americans also made a great mistake where home was equated to home ownership,' Frank said."