At least one analyst has come to the same conclusion as HW's key sources over the past few months: the non-agency securitization market is likely doomed. The failure of Lehman Brothers Holdings Inc. (LEH) on Monday morning led analyst Meredith Whitney at Oppenheimer & Co. to suggest late Monday that home prices will continue to fall further as liquidity issues take a bite out of mortgages, according to a Reuters report. Whitney sees no hope for the return of the securitization market -- even agency securities, which may be endangered by a proposal put out yesterday by the Federal Accounting Standards Board -- and said that the resulting lack of liquidity will pressure home prices anew. "The fact that all banks under our coverage have unrealistic HPA (housing price appreciation) assumptions will in our opinion lead to a material and protracted writedown and capital pressure scenario for banks well into 2009," Whitney said. Whtiney singled out both Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC) as having large mortgage exposure, particularly in terms of home equity lending. (HW has covered second lien exposure at Wells Fargo extensively, suggesting that the brunt of the bank's exposure to second liens has yet to show up). "Similar to how the securitization market volumes have plummeted since the credit crisis hit, housing prices will likely go through a severe correction, the magnitude of which will be beyond that of market expectations," Whitney said, according to the Reuters story. What strikes us as interesting about Whitney's forecast is the creeping realization that securitization may, in fact, be dead. Or very close to it. It's something that market participants have been grappling with for months now. HW's Linda Lowell tackled this issue in some depth in HW Magazine, now available -- if you haven't yet subscribed, you can still order a copy of the very first issue. Whitney's point is a prescient one: without access to liquidity beyond that provided by now government-owned programs, much of the non-agency mortgage market is dependent on portfolio lending, or what's left of it. But among the major commercial banks, just who is really willing or able to portfolio the credit risk that comes with residential mortgage lending right about now? Nearly every major financial player is reeling from existing exposure or pressure in other areas of their business. Which means that those looking for a turnaround in early 2009, in our eyes, are inevitably going to have to push out their projections of recovery. Disclosure: The author held no relevant positions when this story was published; indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.