There was an interesting article in yesterday's Wall Street Journal about how efforts by major U.S. banks and investment firms are trying to unload bad housing loans, and about its speeding up a shakeout in the subprime mortgage industry. Excerpted from the Wall Street Journal:

As more Americans fall behind on mortgage payments, Merrill Lynch & Co., J.P. Morgan Chase & Co., HSBC Holdings PLC and others are trying to force mortgage originators to buy back the same high-risk, high-return loans that the big banks eagerly bought in 2005 and 2006.

Investment-banking firms and investment firms that bought mortgage-backed securities are hiring firms to scrutinize subprime portfolios for loans that violate contracts.

Clayton Holdings Inc. is working with a half-dozen investment-banking firms to identify loans that should be repurchased. Clayton has also been hired by two hedge funds to review mortgage bonds they own for potential repurchases.

"Nobody was doing this in earnest before late last year," says Kevin Kanouff, president of Clayton Fixed Income Services, adding that he expects the volume of putbacks "to trail off in the third or fourth quarter. The carnage that you are seeing"is not over."

In a push to recoup losses, HSBC, which last week added $1.76 billion to its bad-debt costs for 2006 to cover ailing mortgages, has sued several small lenders in federal court in Illinois after they refused HSBC's repurchase requests. Credit Suisse analyst Rod Dubitsky said he expects repurchases to continue to rise for the next six months.

You know what they say" you can't get blood from a stone, and you can't get something from someone who doesn't have it!