Bad Mortgage Pains

Didn't someone recently say that we'd soon be seeing more stories like this one?

NEW YORK - Stocks plunged Tuesday, driving the Dow Jones industrials down more than 240 points in their second-biggest drop of the year, as troubles piled up for subprime lenders.

Investors, bracing for a wilting economy, fled the already deflated subprime mortgage sector on more news that lenders New Century Financial Corp., Accredited Home Lenders Holding Co. and General Motors Acceptance Corp.'s residential unit are facing financial problems. Bolstering the belief that the struggles are widespread, the Mortgage Bankers Association said new foreclosures surged to an all-time high in the last quarter of 2006.

As I've argued for some time, if the housing market does put a significant damper on economic growth in the US, the channel is most likely to be by affecting the balance sheets of lenders. These are some early warning signs.