Some housing bubble news from Wall Street and Washington. HedgeFund.net, "Wall Street expected jack squat from Merrill Lynch. But that didn’t stop Merrill from reaching a new level of money-losing suckitude. For the first quarter Mother Merrill posted a loss of $2.14 billion...sprung from a $6 billion Q1 writedown the Wall Street firm blamed on its subprime mortgage exposure."

From Bloomberg. "CIT Group Inc., the commercial finance company trying to escape a cash squeeze, said it was unprofitable for a fourth straight quarter and cut its dividend after failing to staunch losses on home and student loans. Losses in home and consumer lending units totaled $248.5 million as CIT set aside $150 million for expected costs tied to bad mortgages."

"The lender stopped originating subprime home loans last year. CIT may have more than $4 billion of holdings tied to subprime mortgages, according to a March 17 report by Standard & Poor's."

The Associated Press. "The nation's largest mortgage insurer, MGIC Investment Corp., paid out more claims with more homeowners defaulting on mortgages. The mortgage insurer incurred $691.6 million in claims during the quarter. By comparison, MGIC's payouts last year totaled $870 million, which was a 42 percent increase over 2006."

"At the end of March, MGIC had $221.4 billion insurance in force, compared with $178.3 billion at the same time last year."

From Reuters. "The phenomenon of 'walkaways' or 'jingle mail,' shows every sign of gathering pace and having a substantial impact. Wachovia went so far as to change its models on how quickly loans will go bad in the face of what it called 'unprecedented' changes in consumer behavior."

"'I don't know where the tipping point is,' said Don Truslow, chief risk officer at Wachovia. 'But somewhere when a borrower crosses the 100 percent loan to value, their propensity to just default and stop paying their mortgage rises dramatically and really accelerates up.'"

"He added, 'It's almost regardless of how they scored, say, on FICO or other kinds of credit characteristics.'"

"Regions Financial, a large U.S. bank active in the Southeast, on Tuesday announced that nonperforming assets had nearly tripled to $1.2 billion, driven in part by deterioration in its home equity loan portfolio."

"The bank's CEO, C. Dowd Ritter, gave analysts a similar picture of how borrowers react when confronted with steep drops in home valuations. 'As they started to sell it or refinance, they realized that valuation was 40 percent below what it was that 18 to 24 months ago and they are walking away from those homes in those markets,' he said."

The NAHB. "The mortgage credit crunch has spilled over into land acquisition, land development and home construction (AD&C) lending, increasing the challenges faced by builders in the current housing downturn."

"'This credit crunch actually appears to be worsening despite the concerted efforts of central banks here and abroad,' Bob Mitchell, former president of the National Association of Home Builders (NAHB), told the Senate Small Business Committee. 'It would be ironic and tragic to have the positive work of the Fed undone by bank regulators taking a totally different vision and approach when it comes to lending matters.'"

"Banks have become so wary about lending that credit costs are being pushed up despite sharp cuts in official interest rates, and that is adding to the risks of an economic downturn, the vice chairman of the Federal Reserve said on Thursday."

"'It is reducing the values of some assets and tightening credit cost and availability across a wide range of instruments and counterparties, despite considerable easing in the stance of monetary policy,' Donald Kohn said."

"Asked after his speech whether this meant rethinking how regulators rely on credit ratings as they review capital standards, Kohn said that this was certainly up for debate."

"'I think part of the work-list for the regulators is to reexamine the extent to which we ourselves are relying on these rating agencies to gauge the risks that you guys are taking,' he said. 'I think there was far, far too much reliance on credit ratings all round.'"

"Housebuilder Taylor Wimpey said its 2008 results would be at the low end of expectations based on current conditions in British and U.S. markets."

"'Market conditions in the UK have weakened since we reported our preliminary results (on March 6), with first-time buyers and investors facing particular difficulties,' the company said in a statement. 'Sales rates remain significantly below those of the equivalent period of 2007 on a proforma basis, with higher levels of cancellations being experienced.'"

The Edinburgh Guide. "Would-be first time buyers face the 'hardest struggle ever' to get onto the property ladder in Scotland according to a new report from housing charity Shelter."

"The Index shows that in Scotland, while the average weekly income of working households has risen from £548 in 1997 to £851 now (a 55% increase) - the average first time buyer property has rocketed from £38,845 ten years ago to £108,446 at present."

"Shelter Scotland is holding a summit 'The Scottish Housing Bubble' to look at the prospects for the Scottish housing market."

From Money Extra. "House prices for first time buyers throughout the UK have risen 200% in a decade, Shelter has revealed. The average first time property price has rocketed from £52,674 to £159,494, with house price to income ratios doubling from 1.72 to 3.4."

"The figure is even higher in London with first time buyers facing a crippling 250% increase to almost £260,000."

The London Stock Exchange. "The manager of one of the UK's largest estate agents has issued a gloomy projection for the future of London's housing market. Mark Anderson of Hamptons said that he perceives that prices in the capital have already slumped by 15 per cent, having hit 'unsustainable levels' at its peak during last summer."

"Mr Anderson said the falls had not shown up in housing market indices yet because these tend to be based on mortgage approvals rather than completions. The decline will however become apparent in months to come, he told City AM."

"Richard Lee spent 5.3 million pounds ($10 million) buying 20 rental homes across the U.K. with just 150,000 pounds of his own money. Today, the properties are worth about 60 percent less and owned by the banks that financed the purchases."

"Lee was one of thousands enticed by one of Europe's top five best-performing residential property markets during the past decade. Now repossessions are mounting and properties stand empty as many investors fail to find the tenants needed to cover their mortgages after a building boom flooded cities, especially Leeds and Manchester, with apartments."

"'Buy-to-let investment was a bubble inside the housing market bubble,' said Michael Saunders, a London-based economist at Citigroup Inc. 'It's turning out worse than I thought.'"

"Buy-to-let investors who were behind on their mortgages by three months or more increased by 25 percent to 7,584 in the fourth quarter, according to the London-based Council of Mortgage Lenders. Repossessions rose 26 percent to 1,247."

"The skyline of central Leeds is dominated by construction cranes erecting high-rise condominiums, 60 percent of which were sold before completion to buy-to-let investors, according to London-based real estate broker CB Richard Ellis Hamptons International."

"Thousands more apartments are being built in the center of the city, where two-bedroom homes lost 12 percent of their value in the past two years, according to Hometrack Ltd. Brokers report average rents for these properties have dropped by about 20 percent and about 13 percent of city- center apartments are empty, according to Leeds City Council estimates, based on local tax returns."

"'Twelve months ago, development was an easy way to make your fortune,' said Tom Bloxham, chairman of Manchester-based Urban Splash, which develops derelict sites. 'Today, it's a disaster zone.'"

"City center condominium developments like what's happening in Leeds represent Britain's 'mini-Floridas,' said Alastair Stewart, who tracks homebuilders."

"Lee, 37, bought an apartment in Manchester for 239,500 pounds in October 2005. An identical property in the same building sold for 115,000 pounds earlier this year, said Lee, who has surrendered his keys to the bank."

"Lee also purchased 17 properties, most of them in Leeds, in late 2005. He said he expected to earn a steady income from renting to students. After the transactions were completed, Lee said he realized he had overpaid for the properties. He said 15 hadn't been refurbished as promised, the tenants occupying the homes had left and rental-income projections were wildly optimistic."

"'The valuations were 15 years ahead of their time,' Lee said. 'The biggest genius in the world couldn't have got those loans to work.'"

"Once he has dug himself out of his current financial difficulties, Lee will consider getting back into the business. 'Would I do buy-to-let again?' he said. 'Without a shadow of a doubt. This time I'll ensure I'm in control of all the levers.'"

"Lee estimates his properties are worth about 3 million pounds less than he paid for them. The banks will probably ask Lee to repay the money when the homes, now in their possession, are sold. He doesn't have the money, he said."

From Macleans. "It seemed like a good idea at the time. But an Ontario plan to give away up to $20,000 each to thousands of first-time homebuyers has become a surprising disappointment."

"As the program was rolled out across the province in 2007, Ontario municipalities planned for a deluge of applications. But it hasn't materialized."

"Across the province, cities are struggling to find people interested in the cash, and bureaucrats admit they might not be able to give away all $36 million by next year. It may actually be possible to fail at handing out free money."

"Huron County, a rural municipality on the shores of Lake Huron, was given 17 grants of $8,900 each. After more than half a year of trying, Don Brisson, manager of housing services for the county, has managed to hand out just five."

"Asked why interest in his free money seems so sluggish, Brisson is stumped. 'Maybe we need to promote it more,' he says."

"Such problems come as no big surprise to housing policy analyst Michael Shapcott of an urban issues think tank in Toronto. Shapcott has been watching with concern as a growing gap between home prices and incomes in larger cities reduces housing affordability across Canada, despite low interest rates."

"'Most renters who could afford to switch to home ownership have already made the move on their own over the past decade,' he says."

"Those who remain as tenants likely face serious income barriers and realize a few thousand dollars won't help them make their monthly mortgage payments, even for a house priced below $208,000."

"'These folks probably understand the fundamental issues better than any well-intentioned government official,' he notes."

The Quad City Times. "Caught off-guard by their adjustable rate mortgage, an already-strapped Rock Island couple found themselves struggling to pay bills and make their house payment. Peggy and Dennis Wilson — she a data-entry clerk and he a warehouse supervisor — turned to Rock Island County Economic Growth Corp. for financial counseling after their house payment jumped from $633 to $744."

"They cut things out of their budget and tightened their purse strings to make their house payments. 'It was a very stressful year for us,' said Peggy Wilson. 'You think you are going to lose your dream.'"

"DeShana Forney, executive director of the Illinois Housing Development Authority, announced Wednesday that the Illinois Homeowner Assistance Initiative has a pool of $310 million, up from $200 million when the program was created in February."

"'I’m on a tour of the state to let people know state resources are available,' Forney said."

"Through budgeting, the Wilsons weathered their financial storm and are considering refinancing. When they signed the documents at closing, they didn’t know they were getting into an adjustable rate mortgage. They went to a bank that offered mortgages with only $500 down. The couple was approved in an hour."