Nov. 28 (Bloomberg) — The number of mortgage applications in the U.S. dropped last week, led by the biggest decline in refinancing this year.

The Mortgage Bankers Association’s index of applications to buy a home or refinance a loan decreased 4.3 percent to 652.5 from 681.7 the prior week. The group’s refinancing gauge slumped 15 percent, the most since December, while purchases rose.

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In your opinion, what will this relapse do to mortgage markets?

It’s likely to get bloodier this year and into the next — many more lenders will go out of business. I’d expect to see wholesale and correspondent lending practically disappear, especially in non-conforming marketplace. Retail origination will take center stage as lenders retreat to a channel they feel they can better control. And that will accelerate job losses in the mortgage sector.

Many companies that survived this first wave will catch their breath just in time to be hit again — and many won’t be ready for it. Others, like Countrywide, know what’s coming — the question is whether they’ve done enough to be able to ride it out.

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It’s time for an update on the real estate bubble, which I have been watching since 2003. About a year ago, I laid out a timeline for the real estate boom. Knowing real estate happens in 16-year cycles, I juxtaposed the last boom/bust cycle in the early 90’s onto this cycle. Here’s what I came up with:

1990 (2007): Prices take a serious plunge. One article claims that housing booms are a bad thing and we should hope prices stay low. Increasing mortgage rates are blamed for the bust. The word “recession” is mentioned. Gloom and doom.

That’s next year. How many times do you think you will hear the words “looming recession” next year? More than you want to, that’s for sure…

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PARIS (AP) — A major French bank, BNP Paribas, announced Thursday that it was suspending three of its asset-backed securities funds, saying it could no longer value them accurately because of problems in the U.S. subprime mortgage market.The announcement by the bank’s BNP Paribas Investment Partners unit sent shock waves through an already sensitive money market.

The bank, France’s largest bank by market value, said it was suspending three funds worth a total of 2 billion euros ($2.75 billion): Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia. All funds combined at BNP Paribas Investment Partners are worth more than 350 billion euros ($482.79 billion).

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