Some housing bubble news from Wall Street and Washington. Bloomberg, "HSH Nordbank AG, Germany's only state- owned bank that's partially held by private investors, said profit fell last year on subprime-related losses. The company booked writedowns and provisions on debt investments of about 1.1 billion euros, including 563 million euros linked to U.S. subprime. About 202 million euros of that sum is related to North Street, U.S. mortgage investments it bought from UBS AG, Europe's biggest bank by assets."

"HSH Nordbank has about 2 billion euros in U.S. subprime investments and has put two off-balance-sheet investment vehicles, Poseidon and Carrera, onto its own accounts, spokesman Rune Hoffmann said today. The 2007 writedowns were based on prices in mid-February, he added."

From Reuters. "Countrywide Financial Corp shares fell on Monday following reports it was being investigated by the Federal Bureau of Investigation for possible securities fraud."

"The largest U.S. mortgage lender is being investigated for whether it misrepresented its financial condition and the quality of its loans in securities filings, the Wall Street Journal and the New York Times said over the weekend, citing people with knowledge of the case."

National Mortgage News. "A 'scratch and dent' executive told us recently that several Street firms, including Bear Stearns, Credit Suisse, Lehman Brothers and Morgan Stanley, are using the scratch-and-dent market to unload their nonperforming and subperforming loans."

"More intelligence on investment bankers using contract underwriters Bohan and Clayton: 'All the Wall Street firms used Clayton and Bohan...They never looked at all loans, mostly a sampling, which was never greater than 10%, more like 2% to 5%. Only CitiFinancial, when I was at Argent, reviewed more than 10% of Argent and Ameriquest's loans, and it was usually around 50%.' The source requested that his name not be used."

The Atlanta Journal Constitution. "In the fall of 2005, well before the mortgage meltdown hit, Roland Arnall, the founder of California-based Ameriquest Mortgage, was trying to become an ambassador. But some in the U.S. Senate questioned whether Arnall was the right choice."

"Attorneys general in states across the nation had accused Ameriquest of predatory mortgage lending practices that left thousands of consumers with troubled home loans. With the pressure on, Arnall's company agreed early in 2006 to a $325 million settlement with the states. Within a few weeks, the Senate blessed Arnall's nomination."

"As it turns out, it did very little to ease the huge financial hit experienced by thousands of Americans still trapped in Ameriquest loans. For Georgians who qualified and agreed not to sue the mortgage company, checks that averaged $1,000 began arriving late last year."

"In 2004 David and Kelly Andronica...went through with a refinance with Ameriquest. They thought everything was fine until Kelly put in a call to the company to find out why their property taxes had not been paid."

"Kelly said the customer service agent asked her to verify some figures from her loan application, including an annual income for Kelly in excess of $60,000. 'I haven't made that much money in my entire life,' said Kelly."

"But the Andronicas were to find worse news. They discovered they had signed for an adjustable-rate mortgage instead of the 30-year fixed rate they say they wanted. And, the appraisal Ameriquest ordered significantly overstated the home's value."

"Jason Farmer, who supervised the higher appraisal, said in an interview that he stood by all the home values determined by his Blue Ridge-based company. However, he said that his company stopped doing business with Ameriquest because the lender tried to inappropriately influence appraisals."

"'Ameriquest was particularly bad about pressure for values,' Farmer said. 'A lot of times they would stipulate, 'Well, we are looking at at least this value.'"

"Iowa Attorney General Tom Miller acknowledged that the $325 million didn't come close to covering most consumers' losses. 'To fully compensate them, it probably would have taken billions,' Miller said. 'There was no way to get that out of the company.'"

"Miller also would have liked to have ordered massive changes in mortgages like the Andronicas'. But that wasn't possible."

"'Ameriquest had sold the loans to secondary market investors, as did almost all subprime lenders at the time,' said Iowa Assistant Attorney General Patrick Madigan. 'As much as we would have liked to require Ameriquest to modify the loans, legally it was not an option available to us.'"

The Washington Post. "Appraisers are looking for signs that values are headed lower. Lenders need to know if a home worth $400,000 today might be on its way to a value of only $360,000. They want assurance that borrowers will have enough cash invested in the home to keep them from walking out on the debt."

"'There is higher scrutiny because the market is going down,' said James Loizou, co-owner of Suburban Appraisers & Consultants in Fairfax."

"Loan underwriters are being more demanding. They want information on comparable home sales, homes still on the market, those under contract, closed sales, foreclosures and incentives offered by home builders. They may even want info about homes that didn't sell and were taken off the market."

"'Frankly, those are fair questions,' Loizou said. 'It just makes more work.'"

"If there are foreclosures nearby, or home builders offering deep discounts, or desperate sellers setting their asking prices 10 percent lower than the most recent closed sale, your appraised value will be lower."

"One problem is that some neighborhoods haven't had many sales over the past six months or so. When that happens, appraisers have to look for something similar in other neighborhoods."

From USA Today. "Lender and loan servicer Dennis Lauria says his deepest losses are from borrowers who owe more than their homes are worth and simply mail in the keys, rather than try to work out a new payment plan."

"'I can't get you to pay if you've got no skin in the game,' says Lauria, senior VP of Popular Mortgage Servicing in Cherry Hill, N.J., who says 14% of his customers with subprime loans are in default."

"Even some homeowners who can afford to pay their mortgages are defaulting, Lauria says, because their house might have lost 30% of its value, and they figure it will be a long time before it's worth what they paid for it."

"'They say, 'If I play my cards right, I can live here free for 12 months, maybe longer' before the lender can foreclose, Lauria says. 'Our challenge isn't contacting the borrower. I can talk to them, but they stick their tongue out at me.'"

"Martin Goodman, president of Residential Capital in San Diego, says making contact is only one challenge. The other is persuading delinquent borrowers to tell the truth about their financial condition. He suspects at least 90% of borrowers don't explain the real reason they are falling behind on their payments out of fear it might accelerate their foreclosure."

"'Everybody's grandmother is dying. Everybody's kid is having surgery,' Goodman says. 'I'd rather somebody say, 'We mismanaged our debt. This is what we make, and this is what we can afford.'"

"As home prices fall from coast to coast, 8.8 million homeowners will have mortgage balances equal to or greater than the value of their property by the end of the month, Moody's Economy.com. predicts. That could come as a shock to consumers who thought property values would always rise, and it helps explain the attitudes lenders are seeing among their troubled customers, Goodman says."

"'If you buy a car and it depreciates,' Goodman says, 'you don't expect the automobile dealer to write off your loan. There's a sense of entitlement (among homeowners) that is just unbelievable.'"

"In New Jersey, Lauria said he sent the FHA about 3,000 of his company's delinquent loans to see how many could be refinanced under the FHASecure program. The answer: 61."

"The options the companies can offer are tightly constrained by their contracts with investors who buy and sell pools of loans that are packaged as bonds."

"But Lauria doesn't believe every homeowner who can't pay their mortgage can or should be saved. 'One-third of people who are delinquent should be in foreclosure. It's the best alternative,' he says. 'They don't have the money. They shouldn't have (gotten the loan) to begin with.'"

"And that's why, he says, he doesn't blame some of them for walking away from their homes."

The Miami Herald. "Frustrated homeowners packed a Keep Your Home seminar organized by County Commissioner Barbara Jordan to discuss possible solutions to the mortgage crisis. 'It's so sad that the room is packed,' said Jordan, whose District One includes Miami Gardens and Opa-locka."

"According to 2007 statistics from the Miami-Dade County Clerk's office, some 26,392 homeowners have faced foreclosure in the county, among 86,465 in the state. Since the beginning of 2008, about 3,000 have been foreclosed."

"'Many constituents were calling, trying to find out how to get their property taxes paid and what they could do to save their homes,' Jordan said. 'Their incomes are not growing; they are being forced to make hard decisions, and families just can't keep up.'"

"An Opa-locka resident who would only give her first name, Angie, came to the seminar because she said her situation was overwhelming. 'They are about to take my home,' she said. 'I got in this situation with balloon payments. My interest rate increased to 11.9 percent and I fell so far behind that I wanted to know my options.'"

"Phillip Giollei, community outreach manager at Washington Mutual, (who) was among panelists, said one key requirement was for homeowners to provide full and complete disclosure of their circumstances. 'The mortgage company is not there to judge,' he said. 'I don't want to set you up to fail.'"

"Giollei's suggestions included repayment plans and loan modification. For those who must sell their homes, Giollei talked about the proper channel to list properties for sale, pre-foreclosure sales options and the possibility of a deed-in-lieu of foreclosure -- a voluntary sign-over of the deed to the lender to avoid foreclosure."

"Debra Johnson-King, a HUD-certified credit counselor based in Miami Gardens, suggested credit counseling alternatives and offered some words of hope for homeowners. 'This, too, shall pass,' she said. 'I am here to help you keep a roof over your head.'"

"Johnson-King said sometimes people would have no choice but give up their homes."

"'Sometimes you have to just let go,' she said. And she urged homeowners in trouble to get rid of pride and take action. 'Credit may be messed up but that's all right, because we will deal with it,' she said."

"Jordan hoped residents left the seminar with options. 'I want them to have hope,' she said. 'I want them to know whom to call, where to go and to make good decisions as to hold or cut their losses, move on, rent and try again.'"

The Calgary Herald. "The subprime meltdown marks the final chapter in the financial sector's golden age of the past 25 years, Bank Credit Analyst says. Banks are facing far leaner times and so are their shareholders, the Montreal-based research firm warns in a new report."

"'The blow-up in the markets for subprime paper and other structured products represents a watershed event in the financial markets,' said Martin Barnes, managing editor of Bank Credit Analysis."

"Although Canadians may have been preoccupied with their own equity bull market this decade, the financial markets' golden age was already drawing to a close south of the border, Barnes argues."

"Stock market gains came to a screeching halt with the bursting of the technology bubble in 2000. The financial sector turned its attention to securitization and creating complex financial instruments instead. This allowed it to generate fees, shifted default risk off its balance sheet and freed up capital to originate more loans."

"The value of pooled securities; mortgage-backed and other asset-backed securities, overtook that of outstanding bank loans in 2001. The market value of derivative contracts surged to $11 trillion US by June 2007 from $2.6 trillion in June 2000."

"The subprime securitization market has now also come to a halt. While the securitization model itself isn't dead, it will no longer be a source of easy fees, Barnes said. The market will become much more discriminating; regulators will clamp down."

"The financial sector will likely shrink back to a more normal share of the rest of the economy."

"'Financial shares will likely lead the next equity market upleg, but any outperformance will be fleeting. The financial sector's share of corporate profits and market capitalization is set to shrink significantly in the coming years,' Barnes said."