Quote of the Week

"I think we are in for a recession, probably. How bad it will be, I don't know. But I think there's a lot more bad news to come...

It always starts with housing booms and it takes some time, a year or two, for an economy to come right through it, probably five or six years for the real estate market to come through it.”

- Rupert Murdoch, media tycoon and new owner of the Wall Street Journal

Economists say home prices yet to bottom out

Associated Press

Published on: 06/18/08

Washington —- U.S. home prices are only about halfway through their decline, and most of the further erosion should occur this year, major bank economists said Tuesday.

The 10 economists, including those from Wells Fargo Bank and JPMorgan Chase & Co., also cited the negative overall tone of the economy, with consumer spending curbed, spiking fuel and food prices, tight credit and relatively high unemployment.

"There are a number of head winds that consumers are dealing with," said Peter Hooper, chief economist at Deutsche Bank Securities and head of the American Bankers Association's economic advisory committee. "There's plenty for consumers to feel gloomy about."

The group —- which also includes economists from Northern Trust Co., SunTrust Banks Inc., PNC Financial Services Group Inc. and Huntington Bancorp —- met with officials of the Federal Reserve on Monday.

It expects "sluggish growth, picking up moderately next year," Hooper said at a news conference.

The economy will experience an "unprecedented" type of recession —- the first one without a significant quarterly decline in the gross domestic product, he said. That indicates that factors other than GDP, such as income and employment levels, are important shapers of recession.

Additional declines in average U.S. home prices of around 15 percent between now and late 2009 "clearly will be a drag on consumer spending," the engine of economic growth, Hooper said.

About two-thirds of the economists in the bankers' group don't expect the Federal Reserve to begin raising interest rates until next year, while the others believe the central bank could do so this fall amid growing concern over inflation.

"There's some scope for the Fed to be patient for a while," Hooper said.

Many economists believe the Fed will hold interest rates steady at 2 percent, a four-year low, when it meets next week.

Fed Chairman Ben Bernanke and his colleagues have signaled that the Fed's rate-cutting campaign, which started in September to shore up economic growth, was over because of growing concerns about inflation.

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Real Estate Sales and House Prices

Mortgage delinquency on the rise

Outlook for delinquencies worsens as lower home prices create cycle of increasing defaults.

By Ben Rooney, CNNMoney.com staff writer

May 12, 2008: 3:48 AM EDT

NEW YORK (CNNMoney.com) -- Mortgage delinquencies will continue to rise over the next six to 12 months as home prices decline and economic conditions remain difficult, according to one forecast released Monday.

The Core Mortgage Risk Monitor (CMRM), an index of foreclosure risk compiled by real estate data analyzer First American CoreLogic, increased 16% compared with the same period last year.

CoreLogic analyzes house price trends, foreclosure rates, economic health factors and fraud propensity to predict the chances that future mortgage delinquencies will occur.

The index, which has increased over the last four quarterly reporting periods, is now 47% higher than it was in the first quarter of 2002 when the last recession was winding down.

Nationwide, the markets with highest levels of delinquency risk also had double-digit declines in home prices and weakening labor markets.

"House price depreciation factors are now outweighing economic stress factors," said Mark Fleming, CoreLogic's chief economist.

Of the top 10 markets with the highest risk of delinquency, eight are in California and two are in Florida. Previously, markets in states like Michigan and Ohio, where the labor market has been weak, dominated the list of most delinquency-prone markets.

But rapidly declining home prices, particularly in places like California and Florida where speculative buying drove prices up during the housing boom, are causing a shift in the nation's mortgage delinquency trends.

CoreLogic forecasts delinquency-risk to be worst in California's Inland Empire region, where home price appreciation has declined more than 21%. Elsewhere in the golden state, the Los Angeles and Sacramento areas are considered high risk for delinquencies.

Meanwhile, urban centers in Texas are expected to have a low risk of delinquency. The Dallas-Fort Worth area tops the list, followed by Tulsa, Okla.

During the same time period last year, Detroit, Mich., led the nation in delinquency risk. In Ohio, Youngstown, Dayton and Toledo were also on the list of high-risk markets. Conversely, Phoenix, Ariz., and West Palm Beach Fla., were among the cities with the lowest risk of delinquencies last year.

"High house price markets are now high risk markets," said Fleming.

Falling home prices have created a vicious cycle: Lower prices lead to more defaults, resulting in excess inventory, which causes demand to fall, bringing home prices even lower, leading to more defaults.

This downward cycle puts pressure on the broader economy, with declining home prices impacting personal wealth and consumer confidence.

California Faces Harsh Realty

AS THE HOUSING BUBBLE CONTINUES to burst, 2007 is expected to be the first year where national home prices will see a year-over-year decline. Ten states reported year-over-year home price declines in the third quarter, with the largest declines in Michigan (down 4.0%), California (down 3.8%), Massachusetts (down 2.6%), Rhode Island (down 2.4%), Nevada (down 2.0%), and Florida (down 1.5%). This compares to the U.S. year-over-year increase of 1.8%.

Since many of our banks have exposure to the California market, we decided to take a closer look there.

California home prices are falling for the first time since 1996, and the rate of depreciation accelerated significantly in September and October.

The housing correction has had varied impacts on different markets. Areas, such as Santa Clara, San Francisco, and Ventura County have not felt the same pain in declining housing prices as overbuilt areas such as Sacramento and the Inland Empire.

Existing home sales are down 40% year-over-year, across all segments of the market.

Unsold inventory has skyrocketed to 16.3 months in October, nearing the peak of 18.8 months in the last credit cycle.

Delinquency and foreclosure rates are already at or nearing the last cycle peaks, driven by years of easy credit.

There is concern that the housing sector, to which 25% of total job growth was tied over the last few years, will lead to higher unemployment rates.

In a worst-case scenario, we estimate that home prices need to fall by another 36% in California, versus an 8% decline for the U.S., to reach an affordability index that pares down inventory levels.

A prolonged housing slump is expected to adversely affect the commercial sector, particularly those areas that have supported the buildup of residential housing.

Pain Street USA: '08 housing outlook

The forecast is for a longer, deeper home-price slump than previously expected, with double-digit declines in many markets.

By Les Christie, CNNMoney.com staff writer

December 21 2007: 4:56 PM EST

NEW YORK (CNNMoney.com) -- The United States is deep in its worst housing slump since the Great Depression, and according to a new report, it's not going to get better any time soon.

In a new survey, Moody's Economy.com says many metro areas will record losses of 20 percent or more during the downturn, with the national median price for single-family homes dropping 13 percent through early 2009. Factoring in discount offers from sellers, the actual price decline would be well over 15 percent.

Eighty of the 381 metro areas covered by the report will record double-digit losses, according to the report. Most of the worst-hit markets are in once high-flying areas, such as California and Florida.

The steep losses were bound to arrive sometime. Throughout the housing slump, which began in the summer of 2006, experts kept expecting prices to tumble, but it wasn't until recently that they dropped substantially, according to Mark Zandi, chief economist for Moody's Economy.com.

"There has been a sea change in seller psychology since the sub prime shock this summer," he said. "Sellers now realize they have to drop their prices to make a sale and prices are coming down very rapidly in some markets."

One such place is Punta Gorda, Fla. In Moody's outlook, prices there will undergo the steepest correction of any U.S. market. From their peak during the first three months of 2006, to their bottom, forecast for the second quarter of 2009, prices will decline 35.3 percent. That's in nominal dollars; adjusted for inflation, the loss will be even greater.

Other metro areas expected to go through crushing price drops include: Stockton, Calif., where prices are forecast to drop 31.6 percent, Modesto, Calif. (-31.3 percent), Fort Walton Beach, Fla. (-30.4 percent) and Naples, Fla. (-29.6 percent).

The worst hit market outside the Sun Belt is expected to be Ocean City, N.J. where prices will fall 24.9 percent, according to Moody's. Prices in St. George, Utah (-21.8 percent), Grand Junction, Colo. (-18.9 percent) and Atlantic City, N.J. (-18.6 percent) will also suffer. In the Washington, D.C. metro area, Moody's forecasts a decline of 18.4 percent.

Home prices are being pulled down by an even more severe decline in home sales, which Moody's expects to bottom out in early 2008, when unit sales will be down more than 40 percent from their peak.

Home builders continued to add to inventory even as the slump got well under way, contributing to what is now an 11-month back-log of homes for sale, according to the National Association of Realtors.

Many of these homes are sitting completely empty: The Census Bureau reported a total of 2.1 million vacant homes for sale. Vacant homes add pressure on prices because owners of these houses are usually more willing to slash prices to move the properties. They cost out-of-pocket cash each month while providing neither income nor shelter.

Even though home construction has now contracted severely - the Census Bureau reported Tuesday that new housing starts were down to an annualized rate of 1.187 million units in November, the lowest in 16 years - it will take time to work through the excess inventory.

The housing slump will have a substantial impact on the overall economy, according to Moody's, which says it will depress real gross domestic product by more than a percentage point this year and by 1.5 percentage points in 2008.

Speculative investment in the mid-2000s helped fuel the current slump. Zandi pointed out that 16 percent of mortgage originations during 2005 were for non-owner-occupied housing, twice the number of a few years earlier.

"And that's a very conservative estimate of investor demand," he said. "Many home buyers lied on their mortgage applications." That's because interest rates are lower for owner/occupied dwellings.

Buying for investment was especially prevalent in many resort areas, such as Ocean City, N.J. Many buyers were betting they could hold onto the property for a short time and sell it for a quick profit, a difficult feat to finesse, considering the high transactional costs. Many speculators came late to the party and got caught in the slump. Now their properties are adding to mountainous inventories.

Another factor was excessive new home construction, especially in once hot markets. As prices skyrocketed, builders rushed to take advantage of the increases, contributing to the now high inventories.

Also adding homes to markets was the increase in foreclosure filings. When lenders take back properties, they put them back on the markets. Foreclosures have just about doubled this year.

For the slump to end, much of the excess inventory will have to be worked through. Zandi doesn't envision that happening much before 2010, which he forecasts to be a very modest recovery year with low, single-digit growth.

Countrywide faulted over sub prime loans, foreclosures

By Emmet Pierce
UNION-TRIBUNE STAFF WRITER

November 22, 2007

Nearly 50 sign-waving demonstrators chanted and marched outside the Countrywide Financial office on Frazee Road yesterday to protest the way the firm has handled soaring foreclosure rates in San Diego County.
JOHN GASTALDO / Union-Tribune
Nativo V. Lopez (left) and Nanshi Ignacio, who holds a sub prime home loan, affixed signs to the doors at Countrywide Financial's offices on Frazee Road as a group staged a protest of the company's handling of soaring foreclosure rates in San Diego County.
Countrywide, the nation's largest mortgage lender, has become a target for complaints about the risky sub prime loans widely used in the nation's hot real estate markets during the recent housing boom.

Protesters yesterday said Countrywide and other lenders had steered many borrowers into sub prime loans when they could have qualified for cheaper, conventional mortgages.

S&P say mortgage problems to rise in 2008

Posted Nov 14th 2007 4:35AM by Douglas McIntyre
Filed under: Analyst reports, Forecasts, Economic data, Housing, Federal Reserve

Ah, for some good news about the housing market. But, not today.

S&P said in a report yesterday that the mortgage markets in the US will only get worse in 2008 and that earnings at companies with exposure to these markets will worsen. "Negative home price trends, the shutdown of the sub prime mortgage market and the continued weak state of the mortgage capital markets all translate into lower growth for the mortgage industry," said Victoria Wagner, a credit analyst with S&P.

CNN Money says that "loose lending standards, especially to people with shaky credit, are at the heart of the problem."

The trouble is something that the American psyche rejects, a problem without a solution. Even if the Fed drops rates sharply right now, too many people are behind on mortgages and face higher prices in arenas like energy. These consumers might well not be able to make lower payments. For banks, cutting payment requirements for many customers might mean further write-downs.

It is an ugly play that simply has to limp to the last act. Unfortunately, no one knows when the show will be over.

Fannie Sees Continued Housing Turbulence

Friday November 9, 3:48 pm ET

Fannie Mae Foresees Continued Rocky Housing Market Into Next Year

WASHINGTON (AP) -- Mortgage finance giant Fannie Mae, which posted a big loss in the third quarter, foresees continued financial difficulties next year due to persistent housing market turmoil.

Government-sponsored Fannie Mae, the largest U.S. buyer and backer of home mortgages, reported Friday its results for the first three quarters of the year. Its loss in the July-September quarter more than doubled to $1.4 billion, or $1.56 a share, reducing profits for the nine months by more than half.

Fannie Mae said it expects the housing downturn to continue into 2008, shrinking home prices by 4 percent and weakening demand for mortgages.

"The company believes the continued downturn in housing will lead to further declines" in new mortgages written this year and next, Fannie Mae said.

An estimated 2 million to 2.5 million adjustable-rate mortgages, worth some $600 billion, are "resetting" this year and next, jumping from low "teaser" rates for the first two or three years to much steeper rates that could cost borrowers their homes.

Fannie Mae said that as of July 31, it estimates there were about $185 billion in adjustable-rate mortgages tied to high-risk, sub prime securities scheduled to reset next year. "These resets could result in a further sharp increase in delinquency and foreclosure rates," the company said.

BB&T sees 12-18 months more in real estate slump

NEW YORK, Oct 18 (Reuters) - BB&T Corp (BBT.N: Quote, Profile, Research) Chief Executive John Allison said on Thursday he expects the U.S. residential real estate downturn to continue another 12 to 18 months and said the housing slump has affected the bank's ability to acquire community banks.

On a conference call, Allison said Winston-Salem, North Carolina-based BB&T is "for all practical purposes out of the community bank acquisition business." He said prospective targets are seeking excessive prices, and because community banks are often "residential real estate lenders of last resort," it's hard to conduct due diligence to ensure that the risks BB&T would assume in an acquisition are appropriate.

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A Real Estate Speculator Goes From Boom to Bust

Mark Schiefelbein for The New York Times

Todd Haupt, 33, whose real estate fortunes soured, outside the million-dollar home he once owned in Josephville, Mo.

Published: November 9, 2007

ST. CHARLES, Mo. — The home foreclosure business was very good to Todd Haupt. He started buying and flipping foreclosed houses in 1994, when he was 20, and by 2000 he graduated to building homes.

At 32, with just one semester of community college, he owned a BMW, a Corvette and a 5,000-square-foot house worth $1.2 million. He was a creation of the boom. “I was on top of the world,” Mr. Haupt said recently.

Then, last May, the real estate market stopped booming.

Now Mr. Haupt’s house is in the hands of his creditors, as are the cars, three small office buildings and 89 lots he bought in a subdivision in neighboring Lincoln County.

He owes about $6 million in personal and business debt, and as Mr. Haupt’s fortunes soured, so have those of plumbers, electricians, framers, landscapers, supply stores and others that relied on his business, which he estimated at $300,000 per month.

Mr. Haupt is one of thousands of Americans who jumped into the raging housing market of the last decade, which was heralded in stories of neighbors’ windfalls and reality television shows like “Flip That House,” “Flip This House” and “Flipping Out.”

• Sales Of Pre-Owned North Texas Homes Fell About 13 Percent In October (Dallas Morning News, Nov. 8th): "North Texas Real Estate Information System and Texas A&M University's Real Estate Center: Pre-owned North Texas home sales fell 13% in October vs. October 2006, with 6,378 homes sold... Pre-owned home sales are down about 7% year-to-date in 2007 from the same period in 2006... The median price of homes sold in October was $146,000 – up 2% from a year ago... [In] October, there was about 6.4 months' supply of homes on the market in North Texas... On average, it took 75 days to sell houses in October. There are about 48,000 pre-owned single-family NT homes [and 4,250 condos] for sale."

• Slumping in Seattle (Columbian.com, Nov. 8th): "For the first time since the early 1990s, the median price of homes sold in King County declined last month compared with a year ago, The Seattle Times reports. The Seattle area's median price in October was $387,500, down 1% from $391,300 a year ago. The number of homes and condos on the market has jumped to 14,240, up 40% from 2006, according to figures gathered from the Northwest Multiple Listing Service."

• From RealEstateJournal. Borrowers find help only after falling behind on mortgages

  Struggling homeowners seeking mortgage relief from their lenders say they are hearing a tough message: We can't help you unless you first fall behind on payments. That is putting borrowers in a bind, given that defaulting on a mortgage triggers all kinds of headaches.

  Affordability Problems

• As A 'College Town,' Honolulu Is Pricey (Pacific Business News, Nov. 6th): "Coldwell Banker Real Estate study: Honolulu ranks among the priciest college towns...With an average home price of $843,750, Honolulu, home to the University of Hawaii-Manoa, ranked seventh on the list of the 10 most expensive college markets. Palo Alto, Calif., home to Stanford University, topped the list, with an average home price of $1.7 million. Next on the list were Chestnut Hill, Mass., where Boston College is located, and Los Angeles, home to the University of Southern California and the University of California-Los Angeles. Muncie, Ind., home to Ball State University, was most affordable, with an average home price of $150,000."

  Real Estate Investment and Sentiment

• GE Real Estate Launches Green Initiative (CNN Money, Nov. 7th): "GE Real Estate today announced a new initiative to green its real estate investment business, a global business that generates more than $30 billion in annual transaction volume across 28 countries. Sustainability will be embedded into its existing investment processes, from origination of investments to underwriting, due diligence and asset management in an effort to improve the environmental performance of assets, to positively impact the health of tenants, and to improve the value of the properties."

  Mortgages and Real Estate Lending

• Price Is (Not) Right: Appraisals Now Sink Sales (Boston Herald, Nov. 8th): "Desperate homeowners trying to unload properties face a new obstacle: Appraisers who are increasingly coming in with lower-than-expected estimates of home values. The low estimates are leading to last-minute nixing of some sale deals and putting even more downward pressure on home prices in a tight housing market. Home appraisers, whose estimates are key to the issuance of mortgages, say market forces are ultimately the cause of falling home values. But they acknowledge that loan underwriters... are now more cautious about depreciating home prices... underwriters don’t want to get stuck holding loans for homes whose values will [later fall.]"

• Applications Decrease Slightly (Originator Times, Nov. 7th): "The Mortgage Bankers Association Weekly Mortgage Applications Survey for the week ending November 2, 2007: Mortgage loan application volume was 670.6, a decrease of 1.6% on a seasonally adjusted basis from 681.7 one week earlier... The Refinance Index decreased 3.2% to 2176.1 from 2249.0 the previous week and the seasonally adjusted Purchase Index decreased to 412.7 from 412.9 one week earlier... The seasonally adjusted Conventional Index decreased 2.3% to 960.0 from 982.2 the previous week, and the seasonally adjusted Government Index increased 4% to 188.0 from 180.7 the previous week."

• Mortgage Brokers Fear 'Extinction' If New Bill Passes (Mortgage 101, Nov. 7th): "National Association of Mortgage Brokers: "Mortgage brokers are facing extinction. The U.S. House of Representatives is considering a bill (H.R. 3915) that will fundamentally change the way we are paid, outlaw YSP, and legislate underwriting guidelines into law. Additionally, we fear that all sub prime lending will cease to exist due to excessive lender liability... A controversial section of the legislation attaches limited liability to secondary market securitizers who package and sell interest in home mortgage loans outside of these standards. However, individual investors in these securities would not be liable."

• Brokers Slam AG (Boston Herald, Nov. 7th) Massachusetts: "Mortgage brokers are in an uproar over Attorney General Martha Oakley's proposed regulations for the industry, saying her plans would gut how they’re paid and potentially lead to thousands of job losses. The head of the Massachusetts Mortgage Bankers Association will meet with officials from Oakley's office this Friday in an effort to head off a potential confrontation. The group, which represents both mortgage brokers and lenders, is threatening legal action to block Oakley's new rules, which are set to take effect Nov. 15."

• Should You Buy Indymac On The Capitulation This Morning? (FIG Trader in Seeking Alpha, Nov. 7th): "Indymac Bancorp (IMB), has substantial upside, once the short covering gathers speed... One dividend cut is priced in, and even if they lost money in Q4 and cut the whole dividend, the stock will be much higher in 2008... The rolling capitulation sector-wide among financials is probably 80% done, and perhaps even more so among the mid and small caps. The near term upside is awesome, as seen in the bond insurers since the lows Monday. SEC filings for Q3 are due next week [and] most of the bad news... is priced in. The next big move is up (through Q4 earnings)."

  Global Sub prime Fallout or Global Housing Slump?

• UK Housing Market Hit Unevenly By Credit Crunch (Reuters, Nov. 8th): "Credit information firm Experian: Britain's housing market will become a direct casualty of the credit crunch with the pain felt unevenly across the regions. Experian predicted house prices over the next two years would record the lowest annual increases since the mid-1990s, while repossessions would reach 15-year highs. Experian: "Modest declines in house prices are predicted in the South East and the East of England, while values fall much more sharply in the South West. By contrast, Greater London, where overvaluation is less severe than in the rest of the south, has the UK's strongest short-term outlook after Scotland."

• HSBC Ends Sales of Mortgage-Backed Securities in U.S. (Bloomberg, Nov. 8th): "HSBC Holdings Plc, the biggest U.K. bank, said it stopped sales and trading of mortgage-backed securities in the U.S. after the collapse of the sub prime market forced it to close down two origination units. About 120 securities jobs will be cut globally, including 20 in the U.K... HSBC has also ceased investment-banking coverage of healthcare in the U.S.... The five-month rout in the $6 trillion market for U.S. home-loan bonds has eroded the value of assets including securities backed by sub prime loans and debt guaranteed by government-linked organizations such as Fannie Mae.

• China Limits Foreign Investment In Real Estate, Other Key Areas (Int'l Herald Tribune, Nov. 7th): "China's economic planning agency has issued restrictions on foreign investment in real estate and other industries... Many of the restrictions match a list issued by the NDRC in 2004... suggesting that some [reiterated rules], such as limits on foreign investment in real estate, were not adequately enforced... Apart from the ban on investment in golf courses and in real estate agencies, the list matches current regulations. Foreign direct investment in China rose almost 11% in January-September over the year before to US$47.2 billion. Of that total, foreign investment in property development accounted for 42.3B yuan (US$5.7B)."

  Subprime Fallout

• Morgan Stanley Marks Down $3.7 Billion, Cuts Outlook (Bloomberg, Nov. 8th): "Morgan Stanley joined Merrill Lynch & Co. and Citigroup Inc. in booking losses on sub prime mortgage- related assets and said the outlook for credit markets is bleaker than in September. The second-biggest U.S. securities firm by market value after Goldman Sachs Group Inc. said it lost $3.7 billion in the two months through Oct. 31. Prices for securities linked with home loans to risky borrowers sank further than traders expected, cutting fourth-quarter earnings by $2.5B. The figure may change by the end of the month."

• Contemplating Life Without Guarantors (David Merkel in Seeking Alpha, Nov. 8th): "Financial guarantors have had a tendency to reinsure each other. MBIA (MBI) reinsures Ambac, and vice-versa. RAM Holdings (RAMR) reinsures all of them. The guarantors provide a type of “branding” to obscure borrowers in the bond market. Rather than put forth a costly effort to be known, it is cheaper to get the bonds wrapped by a well-known guarantor; not only does it increase perceived ccredit worthiness it increases liquidity... [Carefully] evaluate guaranteed investments both ways. i.e., ABC corp guaranteed by GUAR corp, or GUAR debt secured by an interest in ABC corp. This is a situation where simplicity is rewarded."

• Stock Market Mayhem And Bush's Moral Swamp (Online Journal, Nov. 8th): "Short-term" asset-backed commercial paper has shriveled by $275 billion in the last 10 weeks leaving the banks with gargantuan liabilities... Bloomberg: "Banks shut out of the market for short-term loans are finding salvation in a Great Depression-era government lending program... Countrywide Financial Corp. (CFC), Washington Mutual Inc. (WM), Hudson City Bancorp Inc. (HCBK) and hundreds of other lenders borrowed a record $163B from the 12 Federal Home Loan Banks in August-September as interest rates on asset-backed commercial paper rose as high as 5.6%. The government-sponsored companies were able to make loans at about 4.9%, saving the private banks about $1B in annual interest."

• AIG Profit FallS 27 Percent (WJLA/ABC News, Nov. 8th): "Losses in AIG's investment portfolio, credit-swap portfolio and mortgage-insurance business added up to about $1.4 billion, and caused net income to fall by 27% compared with last year's Q3... Back in August, AIG called exposure to sub prime debt "minimal." AIG's $872.3 billion-investment portfolio lost $864 million, its credit-swap portfolio lost $352 million, and its mortgage-insurance business lost $215 million... AIG's investment portfolio does include some collateralized debt obligations... But the exposure is smaller than that of banks such as Citigroup Inc. and Merrill Lynch & Co., which have written down big losses on their CDO investments."

• Jim Cramer's Mad Money In-Depth, 11/7/07: The Gisele-Cuomo Selloff (Miriam Metzinger in Seeking Alpha, Nov. 8th): "Andrew Cuomo, the New York Attorney General, issued subpoenas to FNM and FRE to give information on loans they purchased from WM... Concerning Cuomo’s inquiry, Cramer said, “There's only one way out of the mortgage morass. We need to see lower down payments." Cramer is concerned government regulators may scare lenders out of lending. Cramer concluded the stories bringing down the market are temporary and urged investors not to panic.

• SIV Managers Don't Expect Model to Survive Slump (Bloomberg, Nov. 8th): "Managers of structured investment vehicles don't expect their business model to survive as the value of assets shrinks and the companies struggle to borrow, Moody's Investors Service analysts said today. "Some managers hold the view that the short-term debt market for SIV paper has been permanently disrupted and the SIV model will not survive in its current form,'' Paul Kerlogue, a senior credit officer at Moody's in London, said on a conference call. The net asset value of SIVs has fallen to 71% of initial capital from 102% in June."

• Fannie, Freddie, WaMu Tumble on Expanded Probe (Seeking Alpha, Nov. 7th): "Government-sponsored mortgage lenders Fannie Mae (FNM) and Freddie Mac (FRE) received subpoenas from NY Attorney General Andrew Cuomo concerning their due diligence practices and about loans they bought from Washington Mutual and other banks. Cuomo says he uncovered a "pattern of collusion" between lenders and appraisers [to] inflate appraisal values. If decided that they own or guarantee mortgages with inflated appraisals, company policy dictates that the lenders buy back the loans. Last week Cuomo sued the appraisal unit of First American Corp., the number-one U.S. title insurer, for inflating home values under pressure from WaMu... WaMu is Fannie's third-largest loan provider, selling it $24.7B in 2007, and $7.8B to Freddie in 2007."

  Foreclosure Data

• Closure Call (NY Post, Nov. 8th): "RealtyTrac: In Queens, foreclosures were up nearly 70% in Q3'07 vs. Q3'06... Foreclosure tracking site PropertyShark.com: "There are more people talking, more people investigating..." Many foreclosure hunters... are waiting for the moment when banks get desperate and slash the prices they are willing to accept. Greg Fonti, an auction referee... pointed to the late 1980s as historical precedent: "The last time this happened was back in '88... The banks were closing and were getting pressured by FDIC regulators to move these properties off their books. Will the banks start selling them for cheaper? Yes, I have no doubt.