Some housing bubble reports from Wall Street and Washington. Paul Muolo, "According to a new report by the Mortgage Asset Research Institute, 'stated-income loans' deserve their nickname of the 'liar's loan.' MARI says that almost 60% of the stated-income amounts are exaggerated by more than 50%."

From Bloomberg. "Bonds of U.S. home builders, profitable through April, have turned into the biggest losers this year in the market for debt with ratings below-investment grade. Debt sold by D.R. Horton, KB Home and other construction companies have fallen an average 3 percent since May 1, according to Merrill Lynch. That is the worst performance of 37 industries tracked by the investment bank."

"'You have to ask yourself if the worst is over or yet to come,' said Timothy Compan, head of corporate bond strategy at Allegiant Asset Management."

"D.R. Horton said last week that it would sell 50,000 houses in the year that ends Sept. 30, below the 58,000 estimate it gave on April 18. 'Every downturn is longer and deeper than people expect,' Horton's CEO, Donald Tomnitz, said Thursday after the company reported the first quarterly loss in its 28-year history. 'We are assuming the worst.'"

From Danielle DiMartino at the Dallas News. "The first stage of grief is denial. That's the state the few remaining housing bulls seem to be in. In Nevada, foreclosures rose 13 percent over May, nearly double the national rate. In California, foreclosures were up 15 percent, boosting the Golden State to No. 2 in the nation, ahead of Florida."

"Even the usually gregarious NAHB chief economist, David Seiders, could not muster the levity to mention a 'soft landing' in Tuesday's press release. Instead, he spoke of 'growing builder uncertainty on the heels of reduced sales and increased cancellations' and builders' concerns of 'more monetary tightening by the Federal Reserve.'"

The New York Times. "According to Freddie Mac, homeowners are on pace this year to take $170 billion in cash out of their home equity as they refinance their mortgages. That figure is down from last year’s record, $244 billion, but it is still far higher than in other recent years; in fact, about 10 times higher than it was in 1996."

"Homeowners have not only completed more of these transactions in recent years than ever, but they have also grown more aggressive in how much cash they are taking out. More than 20 percent of each refinanced loan will be taken as cash this year, virtually the same as last year. That is more than double the average of the previous five years."

"Instead of saving or investing, some of these borrowers will spend $6 of every $10 they take out in home equity, said Raphael Bostic, a professor of economics at the University of Southern California."

"He cited cars, which typically carry five-year loans. 'If you pay for that car through a house refinance,' he said, 'you’re paying for that car for 30 years; long after you’ve stopped getting value from it. Talk to financial folks, and they’ll say you shouldn’t buy short-term pleasures with long-term money.'"

And from Bill Fleckenstein. "I continue to believe that worrying about the Fed being tough is exactly the wrong thing to worry about. This, after all, is the Fed that precipitated a stock bubble, and then a housing bubble to address what ensued. The Fed only knows how to do one thing, which is to print money and bail out whatever problem it previously created. If one wants to worry, one should worry about the consequences of Fed recklessness."

"Some folks are beginning to rethink the notion of loans against homes as impregnable assets. In my opinion, any company that has profited by aiding and abetting the housing ATM is in trouble, if it has a leveraged balance sheet with its assets being loans to houses."

"I make those comments based on what I can see has gone on, and I'm sure that lots of unusual business practices have gone on that we have no knowledge of. Just as we didn't find out about Enron, WorldCom, options-backdating, etc. until the tide went out, we have yet to discover what borderline, if not outright criminal, behavior occurred in the housing mania. When the stock market begins to connect the dots, all hell is going to break loose."