The housing market is deteriorating so quickly that credit assumptions made only a few months ago are now "unrealistic," and many banks and thrifts will likely have to hike their provisions for loan losses again, according to an analyst at Friedman, Billings, Ramsey.Washington Mutual "revised its provision for loan losses by $1 billion on two separate occasions over the last two months, and [WaMu] is not the only financial company that has revised its credit costs," an FBR equity research report says. In July, WaMu executives estimated that loss provisions would range from $1.5 billion to $1.7 billion this year. Now the giant Seattle thrift estimates that provisions will be in the $2.7 billion to $2.9 billion range. In reporting third-quarter results, WaMu increased its loan-loss reserve from $372 million to $967 million. The company also reported a 72% drop in earnings from a year ago. "We still believe there could be more upside to [WaMu's] provision levels, which would result in lower earnings estimates," the FBR report says. FBR can be found online at http://www.fbr.com.

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