According to a survey of economists and housing experts, The New York Times is predicting the the losses in the housing market could be much greater than is currently expected. The paper says that, "at this juncture, economists say the troubles in the mortgage market could, all told, cost financial firms and investors up to $400 billion."

It is a hair-raising prediction.

A Congressional committee will report today that there will be two million foreclosures of subprime loans by the end of next year. That would wipe out $71 billion in real estate value all by itself.

The Times says that Global Insight, a research firm, predicts that the national average for housing prices will drop 5% over the next year and 10% before mid-2009, for a total of about $2 trillion.

The figures are also an indication that the financial crisis at commercial and investment banks could get worse as they are forced to write down more assets on their balance sheets. It certainly means there is a good chance that quarterly results from firms like Merrill Lynch (NYSE: MER) could be affected well into 2008.

It is a mess and it may be getting much, much worse.

Douglas A. McIntyre is an editor at 247wallst.com.

BusinessWeek reports that as much as a borrower might hope that a bankrupt lender would take them off the hook for repaying the mortgage, life just doesn't work that way.

This article caught my eye because a reader of one of my posts about mortgage company bankruptcies asked a question to which I did not have an answer: "I am in the proc of refinancing, but in Pre forclosure on my home. If Novastr files BK can they continue with the forclosure on my home?" (Sic)

The answer, appears to be that if the mortgage company files for bankruptcy, whoever takes over the loan will proceed with the foreclosure. I say this because according to BusinessWeek, in most cases of lender bankruptcy, nothing changes from the consumer's point of view. When a lender goes out of business, it sells its assets at a discounted price to another financial institution under bankruptcy court supervision and notifies the borrower about the new servicer.

And unless the new servicer has a more lenient policy on foreclosing, it is likely to continue with the foreclosure. Moreover, if the borrower is current on a loan and the lender goes bankrupt, the new servicer will expect those monthly payments to keep flowing.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter.

Foreclosure rates, which jumped an astounding 90% in May, are showing no signs of slowing as something like $2 trillion worth of adjustable rate mortgages are due to reset at higher interest rates.

Once red-hot real estate markets, including Las Vegas, are now ice cold and speculators are being forced to dump properties that they bought at the height of the real estate bubble. The market doesn't look like it will rebound until late in the year at the earliest.

What makes these statistics particularly surprising is that mortgage companies typically want to avoid foreclosures. It's a costly, time-consuming process that can drag on for months. Once a bank gains possession of the home, it has to go through the hassle of finding a new buyer. I don't know whether this data indicates that lenders don't think it's worth the effort to help out home owners or that they've already exhausted every means at their disposal to help them.

The hurt goes beyond subprime mortgages.

If people don't get good prices for their homes, they won't be able to upgrade into more expensive ones, which is why home builders including Toll Brothers Inc. (NYSE: TOL) continue to suffer. Bloomberg News notes that the Mortgage Bankers Association estimates that investment in the residential housing industry, which includes purchases and expenditures for equipment such as heating and air-conditioning, fell 17.2% in the first quarter.

All of this is especially bad news for first-time home buyers. Credit standards are being ratcheted up so high that many people who would have qualified for loans six months ago can't get a mortgage today, according to Bloomberg News.