Financial stocks began generally losing their grip on positive territory around mid-morning Friday as a glut of corrosive news caught up with the sector.

Poor housing data contributed to the reversal. The Census Bureau reported that November home sales slid 9% sequentially and 34.4% vs. last year, and that the new homes inventory rose to 9.3 months.

Meanwhile, bond insurers


(MBI) - Get Report



( ABK), already prominent victims of the ongoing credit crisis, took more hits after

The Wall Street Journal

reported that Warren Buffett is

launching a competing bond insurer through his

Berkshire Hathaway

( BRKA) firm.

According to the


, the new entity aims to allow local governments to borrow more cheaply, and is planned to start up in New York today.

MBIA lately surrendered $3.31, or 14.9%, to $18.96; Ambac was off 13.3% at $25.27. Berkshire traded up 1.9% to $140,400.

Elsewhere in the sector, beleaguered mortgage investor

Luminent Mortgage Capital

( LUM) saw heavy trading following yesterday's disclosure of a huge third-quarter loss -- $520.6 million, or $12.17 a share. A year earlier, the San Francisco-based company lost just 17 cents a share, and in the second quarter it earned 20 cents a share.

As expected, this was in large part due to ramped-up margin calls that

began in August as mortgage woes hit a climax and the secondary market for mortgage-backed securities "effectively ... seized up," working to drain liquidity in a rapid fashion. Luminent shares were shedding 21% to 68 cents.

And shares of



plummeted 25% after the asset manager said it will take charges of between $45 million and $55 million resulting from securitizing its $2.8 billion affordable-housing-bond portfolio with

Freddie Mac

( FRE). That should chop at least 14 cents per share off Centerline's cash available for distribution to between $1.70 and $1.75.

The firm also slashed its quarterly dividend by 64% to 15 cents a share, and set its 2008 adjusted-earnings guidance at between $1 and $1.10 a share. The sole analyst's estimate is calling for $1.90, according to Thomson Financial. Shares were falling $2.57 to $7.70.

After a morning stint in the green, the


Financial Sector Index succumbed to the downward pressures and recently lost 28.33 points, or 0.3%, to 8,258. The KBW Bank was down 0.9% to 87.93, and the Amex Securities Broker-Dealer index gave up 0.6%.

On the flip side, Dutch bank


(ING) - Get Report

rose 1% to $39.29 after striking a deal to sell its NRG reinsurance unit to Berkshire-Hathaway for about $441.3 million (some 300 million euros), calling the move part of its strategy of focusing on its core businesses in insurance, banking, and asset management. After taxes, the sale will result in a capital loss of about $147.1 million. The deal should close in the first half of next year.