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 MBIA ( MBI) and Ambac ( 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 Journal, 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.

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