Some housing bubble news from Wall Street and Washington. Morningstar, "Total loan impairment charges at HSBC's US personal financial services division soared by 70 pct to 11.7 bln usd, lifting the group's overall bad debt charge to 17.242 bln usd, an increase of 63 pct. Europe's biggest bank, which lends to US consumers through its HSBC Finance Corporation unit, has been suffering from rising default levels for the past 18 months as flat or falling house prices make it impossible for overstretched borrowers to repay their debts by tapping into their housing equity."

"In a statement, HSBC chairman Stephen Green confirmed that the bank's US operations could face further bad debt problems this year, saying that conditions in the US 'may well get worse before they get better.'"

"In a conference call, HSBC finance director Douglas Flint said that the US bad debt crisis should come to an end by the middle of 2009, provided the economic slowdown did not trigger a sharp rise in unemployment."

"'It depends on your view of whether the US will have a recession, and if it does, how long it'll last. If employment holds up, we should see a turnaround in 18 months or so,' Flint said."

From MarketWatch. "Shares of Thornburg Mortgage Asset Corp. fell on Monday, plunging as the lender said that it has not been able to meet a new wave of margin calls worth at least $270 million and that it's facing a possible liquidity shortage."

"'There is no assurance as to Thornburg Mortgage's ability to sell such assets or raise additional funds in the current market at acceptable prices, or to raise additional capital,' the company said in a statement. 'If the company is unable to satisfy outstanding margin calls, any or all of its reverse repurchase agreement counterparties may declare an event of default and liquidate the pledged securities.'"

"Thornburg's been hit hard by the fallout in the mortgage market because it's specialized in two industry hot spots: adjustable-rate 'jumbo' mortgages and the trickier 'Alt-A' loans."

From Bloomberg. "Fannie Mae and Freddie Mac, the biggest sources of financing for U.S. home loans, agreed to overhaul the way property appraisals are conducted under an accord with New York Attorney General Andrew Cuomo, according to a person familiar with the negotiations."

"Fannie Mae and Freddie Mac agreed they will no longer purchase loans from mortgage originators who use their own in- house appraisers, according to the person, who spoke on condition of anonymity."

"Most homeowners at risk of foreclosure have yet to ask lenders for help and may lose their homes as a result, Treasury Secretary Henry Paulson said. More than 80 percent of 'at-risk homeowners aren't responding' to letters sent by the Treasury-backed Hope Now Alliance of mortgage lenders, Paulson said."

"'Homeowners must actively engage with their lenders and demonstrate that they want to keep their homes,' Paulson said in a speech. 'If borrowers don't ask for help, they will have to bear the consequences, which may very well mean losing their homes.'"

"Paulson had a tough message for homeowners: Don't think about walking away from your mortgage if you can afford the payments. In a speech Paulson said people who can afford their mortgage payments but decide to walk away from their homes because of falling home prices were nothing more than 'speculators.'"

From City Business. "The Federal Reserve’s lowering of interest rates looks similar to the moves that set up the housing market collapse, but a repeat scenario is unlikely, said Lawrence Yun, chief economist with the National Association of Realtors."

"'Many blame Mr. Greenspan for having fueled the housing market bubble and subsequent collapse by keeping the rates too low for too long,' Yun said."

"Yun said real estate speculation was a key factor in the first collapse, with buyers using subprime loans to acquire investment property. When those properties flooded the market and did not sell, speculators often walked away from mortgages they couldn’t afford. Foreign investors who gambled on subprime loans in the secondary mortgage market were burned."

"'Is the current action by the Fed simply trying to replay the same volatile game? The answer is an unambiguous no,' Yun said. 'The same game is played out because the global capital providers will not be taken for fools again. German mutual funds or the Chinese government or the Florida’s teacher pension fund will no longer buy toxic subprime loans.'"

The Associated Press. "Folks on Humphrey Hill Drive were still waking up on the icy Saturday morning the shark hunters came to town. They rounded the suburban traffic circle in a pair of rented school buses after a half-hour ride from far more modest neighborhoods, rumbling to a stop at the Garmone family's driveway. Forty-two caffeinated Clevelanders piled out, their leaders carrying bullhorns."

"Their quarry, Mike Garmone — a regional VP at Countrywide Financial Corp., the nation's largest mortgage lender — didn't answer his door. So they deployed, ringing bells at the big homes with three-car garages, handing out accusatory fliers and lambasting Garmone and his company's loans."

"'The problems that exist everywhere now ... showed themselves earlier here because there was no getting out of them,' says Zach Schiller of Policy Matters Ohio, a Cleveland nonprofit focused on the state's economy."

The LA Times. "Insurance lawyer David Grais has been poring over equations in finance books to get up to speed on his new specialty: lawsuits stemming from the sub-prime mortgage debacle."

"'This whole area is a new dawn' for lawyers, Grais said."

"Sub-prime borrowers are suing loan brokers and lenders, accusing them of deceptive practices. Wall Street firms that bought now-delinquent sub-prime loans are trying to force lenders to buy them back."

"Investment-bank shareholders are going after those firms' managers, saying they took excessive risks by loading up on bonds backed by sub-prime mortgages. And investors are suing money managers whose sub-prime-laden funds have suffered hefty losses."

"'Somebody described it to me as, 'Everybody's standing in a circle shooting at each other,' said lawyer Kevin LaCroix."

"In all, the 278 civil sub-prime-related cases filed in federal courts last year already amounted to half of the 559 actions brought during the entire savings-and-loan crisis from 1989 to 1995, according to Navigant Consulting Inc."

"The Securities and Exchange Commission, the Justice Department, the FBI and many state attorneys general all are conducting sub-prime-related probes. If government regulators show that banks didn't adequately disclose the risks, it 'would put this litigation into an entirely different and far more serious category,' said Jonathan Macey, a securities-law professor at Yale University."

"'That would take these from 'kind of improbable to win' to 'How many zeros are we talking about on the check?' he said."

The New York Times. "Real estate and mortgage industry executives said today's 'rent versus buy' decision is more complicated than in years past. For one thing, mortgage executives say, even people with good credit face difficulties getting mortgages these days."

"Matthew Hackett, underwriting manager for a Manhattan mortgage lender, said buyers who need jumbo loans - those above $417,000 - must typically have enough savings after the purchase to carry them through at least six months of mortgage payments."

"'And if you want a good rate,' Hackett said, 'it's more like 12 months.'"

"Mark Obrinsky, chief economist at the National Multi Housing Council, a trade group in Washington, said the shadow rental market of unsold homes and condos put up for rent was rising, although no good data exist on the extent of that phenomenon. Nearly 3 percent of the homes now for sale are vacant, he said, a number that far exceeds historical highs."

"Sam Heskel, the executive VP of a real estate appraisal and consulting company in Brooklyn, N.Y., said he had seen 'a lot of developers changing from condos to rentals just to weather the storm.'"

"Some homeowners are doing the same. Heskel said he had appraised a home for 'more than $500,000' in Massapequa, on Long Island. The owner had renovated and had initially planned to sell it for a profit. Now she will try to rent the house until prices rise."

"And even if, after accounting for the mortgage's tax benefits, the landlord can charge enough rent to cover the mortgage, Obrinsky of the housing council said, yearly property maintenance costs can run from 1 to 1.5 percent of a home's purchase price."

"'Most of the time, if you can sell something for more than you bought it for,' said Michael Moskowitz, president of Equity Now, the mortgage lender, 'you're better off selling it and walking away.'"

From CNBC. "With home prices falling and families losing their homes to foreclosure, some people who under other circumstances would be looking to buy their first home now see greater security in renting."

"One such person is Lisa Chesnut, who lives in Tucson, Arizona. With a good job and two young sons, 29-year-old Chesnut and her husband, Bryan, look like classic first-time buyers. They had considered it, until the the market started to slide a year ago."

"'At first we thought, prices are falling, that's good,' she said in a phone interview. 'Then we started reading about the foreclosures and the ARM rates and people losing their homes. We thought, what if something happened where we could lose our house?'"

"'Turnover is slowing and the rate of moving out for home purchase we also saw slow throughout 2007,' said Fred Tuomi, president of property management at Equity Residential, who oversees about 150,000 apartments nationwide."

"'There's probably 700,000, maybe 800,000 people out there that are not getting into the market either as a renter or as a homebuyer,' said Walter Molony, spokesman for the NAR. 'Where are these folks? They're out there, they've got jobs. Some of them are moving back with their parents, never left the house, they're doubling up with roommates.'"

"'They've seen what can go wrong in the mortgage market,' said said Bob Moulton, president of Americana Mortgage Group, whose company brokers $300 million of mortgages a year. 'Everybody's advising them, from the mother, to the father, to the uncle, their co-workers, telling them, 'Don't buy. Prices are coming down.'"