Some housing bubble news from Wall Street and Washington. Associated Press, "Industry data released Thursday show January pending U.S. home sales remained at the second-lowest reading on record. The National Association of Realtors said its seasonally adjusted index of pending sales for existing homes held at 85.9, the same reading as December and just short of a revised record low of 85.8 in August. The reading was 19.6 percent below year-ago levels."

"An index reading of 100 is equal to the average level of sales activity in 2001, when the index started. Lawrence Yun, the trade group's chief economist, said in a statement that the reading is a sign the housing market is stabilizing."

"'Our members are telling us there's been a pickup in shopping activity.' Yun said. 'Our hope is that the increased traffic of buyers looking at homes will translate soon into more contract offers.'"

"Home foreclosures soared to an all-time high in the final quarter of last year. The Mortgage Bankers Association, in a quarterly snapshot of the mortgage market released Thursday, said the proportion of all mortgages nationwide that fell into foreclosure shot up to a record high of 0.83 percent in the October-to-December quarter."

"That surpassed the previous high of 0.78 percent set in the prior quarter. 'Clearly it's the worst it's been,' chief association economist Doug Duncan said in an interview with The Associated Press."

"The percentage of subprime adjustable-rate mortgages that entered the foreclosure process soared to a record of 5.29 percent in the fourth quarter. That was up from 4.72 percent in the prior quarter, which had marked the previous high."

"Late payments skyrocketed to a record high of 20.02 percent in the fourth quarter, up from 18.81 percent — the previous high — in the third quarter."

"'Declining home prices are clearly the driving factor behind foreclosures, but the reasons and magnitude of the declines differ from state to state,' Duncan said. 'We expect some increases in the next couple of quarters.'"

From Reuters. "Wall Street and policy-makers have worried that foreclosures will grow when many subprime loans face a built-in interest rate reset in coming months. But Duncan, blamed the current spree of failing loans on poor credit quality of the borrower rather than a rate spike."

"'The current delinquencies are due to credit quality rather than resets,' he said."

From Bloomberg. "U.S. mortgage foreclosures rose to an all-time high at the end of 2007 as borrowers with adjustable-rate loans walked away from properties before their payments increased, the Mortgage Bankers Association said today."

"Late payments rose to a 23-year high, the organization said in a report today."

"'We're seeing people give up even before they get to the reset because they couldn't afford the home in the first place,' said Jay Brinkmann, VP of research and economics for the trade group."

"'It comes down to an overstretching of buyers to get into homes they couldn't afford and an overextending of credit by lenders who were more willing to take risk,' Brinkmann said."

"About 40 percent of all foreclosures are homeowners with prime or subprime loans who couldn't make their payments before the reset, Brinkmann estimated in an interview. Another 23 percent are borrowers who received some form of loan modification, typically a freezing or a reduction of their rate, and then default, he said."

"The share of late payments for adjustable prime loans was 5.51 percent, from 3.39 percent a year earlier, and the foreclosure inventory rose to 2.59 percent, almost tripling from a year earlier."

"Carlyle Group's publicly traded mortgage bond fund failed to pay margin calls, prompting creditors to seek immediate repayment, as the burning subprime mortgage market scorches investors in even the highest-rated debt."

"The fund used loans to buy about $22 billion of AAA rated mortgage debt issued by Fannie Mae and Freddie Mac. Carlyle said last month its agency mortgage securities 'have the implied guarantee of the U.S. government and are expected to pay at par at maturity.'"

"The U.S. Treasury denied speculation today that the government will guarantee mortgage- backed bonds issued by Freddie Mac and Fannie Mae."

"Carlyle's counterparties are Wall Street firms, which use repurchase agreements to lend money and require securities be put up as collateral. As the perceived credit worthiness of asset- backed bonds declined, the amount of money that can be borrowed using them as collateral fell."

"'Market conditions are the worst anyone in this industry can remember,' said Alain Grisay, CEO of London-based F&C Asset Management Plc, on a conference call. 'I don't think anyone has a recollection of a total disappearance in liquidity. I just cannot remember a time when for six months there are billion of dollars worth of assets out there for which there is just no market.'"

"Thornburg Mortgage Inc., the New Mexico provider of 'jumbo' home mortgages, lost more than half its value in New York trading after receiving a default notice from its own bankers."

"The company may need more than $300 million to meet the margin calls and restore capital, analyst Jason Arnold said in a March 4 research note. 'Bankruptcy is now a more likely outcome,' Arnold said today. 'We would expect little to no value to remain for shareholders.'"

"Merrill Lynch & Co on Wednesday said it will eliminate 650 jobs as it stops making subprime mortgages through its First Franklin Financial Corp unit."

"Merrill bought First Franklin and much of its loan portfolio from Cleveland-based National City Corp for $1.3 billion in December 2006."

"Taylor Wimpey Plc, Britain's biggest homebuilder, said annual profit dropped as property markets cooled in the U.K., U.S. and Spain. Earnings in North America dropped more than 80 percent and Spain lost 70 percent as operating profit margins collapsed and sales plunged."

"CEO Peter Redfern said markets will be 'more difficult' this year. 'Conditions in the U.K. are more subdued than they have been for some years,' Redfern said."

"The company booked 283.4 million pounds in writedowns after reviewing its North American operations and land values, with the bulk being in Florida and California, Redfern said. He wouldn't rule out further writedowns."

"'The outlook for the U.S. remains pretty uncertain. We're certainly not expecting significant improvements during 2008,' the CEO said."

The Wall Street Journal. "In the latest sign of how the credit crunch is hurting even borrowers with good credit, some home-equity lenders are starting to slam the door on homeowners who want to refinance their primary mortgages."

"Approvals from home-equity lenders used to be routine, particularly if the borrower wasn't increasing the size of the mortgage as part of the transaction. But that's no longer always the case -- even in places where the housing market hasn't been hit by huge price declines."

"'For borrowers trying to improve their situation, this is a nightmare,' says Richard Redmond, a mortgage broker in Larkspur, Calif. That's because getting a new home-equity loan to replace the old one in order to get a refinancing approved 'may be impossible,' he says."

"Dale Betterton Betterton bought a home in Boulder, Colo., this past summer with 5% down. When interest rates dropped last month, he decided to refinance. But National City, which holds his home-equity loan, declined to approve the deal."

"Mr. Betterton had 'superb' credit and the new mortgage would cut his mortgage rate by more than a percentage point, making him a better credit risk, says his mortgage banker, Lou Barnes."

"'My understanding was it was pretty straightforward to refinance when rates go down, and there wouldn't be any strange obstacles,' says Mr. Betterton, who is now considering paying off his second mortgage so he can refinance."

"David Erickson, a mortgage broker in Lynnwood, Wash., says he's had two refinancings declined by National City that 'would easily have gotten approval six months ago.' In the past, he says, home-equity lenders were eager to keep the loan on their books. Now, he says, 'they'd sure love to get paid off and get 100 cents on the dollar.'"

"A recovery in global credit markets will depend on stabilization in U.S. home prices and a massive reduction in housing inventory, former Federal Reserve Chairman Alan Greenspan told Deutsche Bank AG clients on Wednesday."

"Greenspan, the U.S. Fed chairman from 1987 until 2006, also blamed the credit crisis on a 'general underpricing of risk' and a 'breakdown' of how assets are valued after the U.S. housing bubble burst."

"'The sooner we can get home prices in the United States stabilized, the sooner we will resolve all questions,' Greenspan said, according to two sources who were on a conference call with the former central bank chief."

"The inventory of homes for sale rose 5.5 percent to 4.19 million units at the end of January, roughly a 10 months' supply at the current sales pace. U.S. home prices also dropped in the fourth quarter, the first consecutive two quarters of decline since 1982, according to Freddie Mac."

"'The level of housing has got to fall,' Greenspan said, according to one source on the call. 'If it doesn't fall further we are going to be involved with a continual backing up of inventory pressing on prices.'"

"Most of the recent housing-related initiatives have focused on keeping people in their homes. But lawmakers would actually help the housing market stabilize more quickly if they took action to dislodge those borrowers who don't have the desire and financial ability to stay."

"This cycle will be difficult to break. But as we saw in California in 1996, buyers will flock to the market once a bottom is reached."

"Many of these types of borrowers made little or no down payment, and due to falling house prices are now 'underwater' on their mortgage. Some overstated their income or net assets and cannot afford their mortgage payments. Others can afford their mortgage payments but have decided to stop making them because they have no equity in the home."

"Although this recommendation might not be politically correct, lawmakers should make changes that would hasten -- rather than extend -- foreclosures for that segment of borrowers."

"The recent housing bubble and mortgage problems weren't created overnight, and it will take several years to deal with the aftermath. We are well on our way toward establishing an environment that will facilitate the market recovery."

"Lawmakers should not overreact with radical changes that could cause more harm than good. Rather, they should tweak existing laws and allow market forces to work."