Purchased HELOC.

Get that term into your head. Home equity loans that were purchased from other originators are the scourge of the system. Any piece of paper backed by these second liens that were issued by pure mortgage originators is just a goner.

This is the paper that was generated by Fremont General (NYSE: FMT) (Cramer's Take) and NovaStar (NYSE: NFI) (Cramer's Take) and New Century Financial and American Home Mortgage and so many of the other bankrupt and walking-dead companies. It was mostly no-documentation loans paper and served as another way to tap money that was meant to be paid back when you flipped a home. It was predicated on the continued increase in value of your home.

No one would be particularly surprised that Chinese stocks traded on U.S. exchanges did well in the third quarter. The Shanghai Composite has doubled so far this year, and many stocks like Baidu (NASDAQ: BIDU), the China search engine, have made stunning gains.

In the third quarter, China Eastern Airlines (NYSE: CEA) moved up 112%. China Finance Online (NASDAQ: JRJC) ran up 282%. It is hard to imagine that the Chinese market can keep up this momentum, but analysts say that every quarter.

No one would find it odd that home builders and mortgage lenders were among the big losers in the quarter. Beazer Homes (NYSE: BZH) fell 66% to $8.25. Fremont General (NYSE: FMT), which has a subprime lending operation, fell 63.4% to $3.90. Mortgage lender Novastar Financial (NYSE: NFI) was down 68% to $8.87.

As retail sales fell, specialty store operations took a pounding. Gottschalks (NYSE: GOT) fell 63.5% to $4.34. And, Sharper Image (NASDAQ: SHRP) dropped 63.7% to $4.13.

The toughest part of the quarter is the realization the retail, housing, and mortgage shares could actually go lower during the October to December period.

Douglas A. McIntyre is a partner at 24/7 Wall St.

President George Bush seems an unlikely hero for Wall Street, but he is just that this morning.

The president intends to announce his plan to ease the plight of the subprime mortgage industry. Having so many voters without homes is not working out.

But, the law of unintended consequences is kicking in. Home builders are up big while the market waits for the Bush plan announced in about two hours. Beazer Homes (NYSE: BZH) is rallying off a level near its 52-week low and is up 8% to $10.65. Lennar (NYSE: LEN), Hovnanian (NYSE: HOV) and other large home builders are up sharply was well.

Over on the real estate lending side of town, Fremont General (NYSE: FMT) is up 15% and Countrywide Financial (NYSE: CFC) is in the green by 7%.

According to several press reports picked up by MarketWatch: "The Federal Housing Administration mortgage insurance program will be changed to allow more people to refinance with FHA insurance if they fall behind on adjustable-rate mortgages."

However, no one outside the Bush administration is likely to know much about the details of the plan yet and some of the proposals may require approval from Congress.

This means that just after Mr. Bush's speech, the home building and mortgage lending stocks could go right back down.

Douglas A. McIntyre is a partner at 24/7 Wall St.

With stunning swiftness, the damage from the collapse of the subprime mortgage market is bleeding out to other parts of the economy. And that damage will explode on Monday as investors continue to flee the sector.

How so? Because late Friday afternoon, according to the Wall Street Journal [subscription required] two subprime lenders dropped several bombshells that have left them fighting for their lives:

• New Century Financial Corp. (NYSE:NEW), one of the largest subprime lenders, is facing a federal criminal inquiry into its accounting and trading in its securities. Furthermore, if NEW's lenders don't let it off the hook for meeting the terms of its lending contracts or it does not find new lenders, NEW stated that its auditors are likely to warn of "substantial doubt" over its ability to remain in business. Translation: NEW could go bankrupt very soon.
• Fremont General Corp. (NYSE:FMT) will stop making subprime residential loans and is negotiating to sell that business.