Seen on a discussion board for loan officers and therefore unverified:Via EMAIL/FACSIMILE

“To Whom It May Concern:

Please be advised that this communication is submitted to your attention in order to alert you to the fact that effective immediately Mortgage Lenders Network USA, Inc. (”MLN”) will regrettably no longer fund residential mortgage loans. This course of action has been necessitated as a result of a lack of available warehouse funds.

….Mortgage Lenders Network USA, Inc.”

Update Jan 2, Dow Jones picks up the story: “The decision by MLN to stop funding new loans, and to consider alternatives for its wholesale business, is the latest sign of an ongoing shakeout in the subprime mortgage industry. Late last year, for example, two subprime lenders, including Ownit Mortgage Solutions, shut down citing “the current unfavorable conditions of the mortgage industry.”

Top subprime lenders as of 2Q06, per the Mortgage Bankers’ Association:

1. Wells Fargo
2. HSBC
3. New Century
4. Countrywide
5. Fremont
6. Option One
7. Ameriquest
8. WMC
9. Washington Mutual
10. CitiFinancial
11. First Franklin [acquired by Merrill Lynch]
12. GMAC
13. Accredited Home
14. BNC
15. ChaseHome Finance
16. Novastar
17. Ownit [gone]
18. Aegis [just closed two subprime operations centers]
19. MLN [going, apparently. Update Jan 1 rumor of potential acquisition by a "major Wall Street player"]
20. EMC
21. ResMae
22. FirstNLC
23. Decision One
24. Encore [being acquired by Bear, Stearns]
25. Fieldstone [closing 7 of 16 ops centers, debt covenants modified thru 1/31/2007]

Of course, the lead Eeyore is none other than Nouriel Roubini. “While last week’s housing news were mostly bad, this week’s data were mixed. The strongest good news figure was the 3.4% increase in new home sales; and this figure led many to repeat the argument that housing recession is bottoming out. Existing home sales were up a marginal 0.6% (effectively statistical noise). While the other news from the housing market were much weaker: falling mortgage applications (-14%), both for home purchases and refinancings; falling home prices according to the Shiller-Case index; another mortgage banker closing down; a leading home builder reporting a loss in Q4; many housing jobs that are filled by immigrants (and not as easily recorded in the official data) are now lost.”

Eeyore’s little helpers include Paul Kasriel of Northern Trust: “Of those postulating the possibilities of a housing-driven recession, Paul Kasriel, Northern Trust’s chief economist, is among the more pessimistic.

He thinks that because housing played such an important role in keeping the economy chugging during the last two years, if it is responsible for a recession, that downturn could be particularly severe.

Kasriel refers to a fairly simple formula: take the dollar value of new and existing single-family homes in 2005 and divide it by the nation’s gross domestic product, the total of all goods and services produced in one year. That gives you a ratio of 16.3 percent.

`That’s off the scale,’ Kasriel said. `The ratio has never been that high. The median is 8.4 percent and the previous high, of less than 12 percent, was in the late 1970s.’

Real estate prices have been dropping faster than ever before. The National Association of Realtors said last month that the median price in October for existing homes fell to $221,000 nationally, down a steep 3.5 percent from October 2005.

`That’s the largest decline on record since 1968, and the speed of the decline has been breathtaking,” Kasriel said. `It’s just like a straight line down.’”

Elsewhere, he sees the chance of a recession as high as 45% unless the U.S. Federal Reserve moves quickly to cut short term interest rates

Roubini and Kasriel are joined by Dean Baker of the Center for Economic and Policy Research. In his paper “Recession Looms for the U.S. Economy in 2007“, Mr Baker predicts: “The recovery that began in November of 2001 is likely to come to an end in 2007. The main factor pushing the economy into recession will be weakness in the housing market. The housing market had been the primary fuel for the recovery until the last year, as there was an unprecedented run-up in house prices since 1997. With prices now headed downward, construction and home sales have dropped off by almost 20 percent against year ago levels. Even more importantly, borrowing against home equity, which had been the main factor fueling consumption growth, will plummet as many homeowners lack any further equity to borrow against. The result will be a downturn in consumption spending, which together with plunging housing investment, will likely push the economy into recession. The economy will see a substantial net loss of jobs, with nominal wage growth slowing as the labor market weakens over the course of the year.”

According to Reuters, ECRI said its Weekly Leading Index slipped to 138.5 in the week ending Dec. 22 from 139.7 in the prior week, due to higher interest rates and more jobless claims. However, annualized growth in the week ended Dec. 22 rose to 3.8 percent from 3.4 percent in the prior period, a reading not reached since last February.

“Given the steady improvement in the WLI, recession is no longer a serious concern,” said Lakshman Achuthan, managing director at ECRI.

Well they have a convincing track record. But I’m not convinced. If, as, and when there is reason to believe either mortgage equity borrowing will begin strengthening again or another sufficiently large source of bubble credit collateral becomes apparent, then I will be ready to be convinced.

An acquaintance on a trading board (mmb at Avid Trader), who is himself a professional trader, maintains an “economic barometer”. It is interesting to observe the divergence that currently exists in this strange, jammed, rally that now appears to be slowly rolling over.

ATA Truck Tonnage Index Plummeted 3.6 percent in November:

“`November 2006 marked the single worst month for for-hire truck tonnage since the last recession,’ said ATA Chief Economist Bob Costello. `Both the month-to-month and year-over-year decreases indicate that the economic slowdown is in full gear. The most troubling number is the 8.8 percent contraction from November 2005, despite the fact that year-over-year comparisons are difficult due to the very robust volumes during the same month last year. One month certainly doesn’t make a trend, but if we continue to see year-over-year reductions of similar magnitudes in the next couple of months, it could indicate a greater economic slowdown than economists are projecting at this point.’ Trucking serves as a barometer of the U.S. economy because it represents nearly 70 percent of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods.”