The credit crunch isn't over yet, not with downgrades to major monoline bond insurers and private mortgage insurance providers last week by key credit rating agencies. Not with housing prices still likely to slide further in the months ahead. Not with option ARM resets looming, and HELOCs provining to be problematic That's the message coalescing Monday in two key analyst reports that sent financial and banking company shares tumbling, despite overall recovery in U.S. stock markets on Monday. Seattle-based Washington Mutual (WM) saw its shares clobbered after UBS AG (UBS) analyst Eric Wasserstrom raised his forecast for mortgage losses, saying that he now expects the bank to absorb $21.7 billion in mortgage losses through 2011. WaMu's current guideance predicts total mortgage losses of $12 to $19 billion. Shares had fallen more than 12 percent on the news, when this story was published. Rock-star Oppenheimer & Co. analyst Meredith Whitney made headlines again on Monday as well, suggesting that monoline bond insurer downgrades last week, affecting both MBIA Inc. (MBI) and Ambac Financial Corp. (ABK), would come back to haunt major Wall Street securities firms. Whitney said that the monoline risk factor was one that could further erode hedge effectiveness heading into the third quarter, according to a report published Monday by Bloomberg News. Many of Wall Street's investment banks are likely to report that existing hedges largely failed during the second quarter; Lehman Brothers Holding Co. (LEH) was the first major Wall Street presence to admit as much in an early earnings summary is released on Monday. Whitney estimated Monday that Citigroup Inc. (C), Merrill Lynch & Co. (MER) and UBS AG -- three firms with the largest relative exposure to the monolines -- could face losses of more than $10 billion, thanks to the now-precarious position the formerly AAA-rated monolines now find themselves in. All three companies were off their opening prices in afternoon trading Monday, with Merrill dropping 4.59 percent to $37.23 when this story was published. The drop in key financials was a drag on the Dow Jones Industrial Average Monday afternoon -- as was investors' apparent disappointment in a new Apple iPhone -- but wasn't enough to pull it into the red overall on Monday. The index stood up 26.87 points on investor relief that the price of oil had backed off of its Friday highs. Disclosure: The author held no positions in publicly-traded firms mentioned herein when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.