Some housing bubble reports from Wall Street and Washington. "U.S. Home builder M/I Homes Inc. on Tuesday said total contracts for new homes fell 35 percent and a whopping 47 percent in the-once sizzling Florida market, reflecting a deteriorating U.S. housing market."

"'New contracts for the quarter were negatively impacted by a combination of factors, including reduced traffic, softening demand, increased cancellation rates and higher unsold inventory levels,' M/I Homes CEO Robert Schottenstein said. 'As evidenced by these factors, housing conditions in most of our markets are challenging,' he added."

"M/I, the No. 21 U.S. home builder, was one of the first builders who report on the calendar quarter to release orders. 'Here's your first piece of data from the companies that report on the quarter and it doesn't look good. It looks pretty bad,' analyst Barbara Allen said."

"National City Corp, the No. 8. U.S. bank, said on Monday it may sell two mortgage lending units to reduce its exposure to subprime lending as demand for home loans declines. National City also said it is mulling the sale of NationPoint, an affiliate that engages in direct-to-consumer mortgage lending."

"'This is a strategic review to possibly reduce National City's presence in nonprime mortgage lending,' spokesman Chris Kemper said."

"The subprime unit has struggled in recent quarters, dragging down the parent company's consumer-finance profits. By the end of last year, First Franklin's profit margins had tumbled to their lowest level since National City bought the business. In its annual report, National City warned that the mortgage business 'will be under margin and volume pressures' in 2006."

The Washington Post. "A potential financial disaster that could have shaken the housing market was averted because regulators discovered accounting failures at Fannie Mae and Freddie Mac, the new head of the agency that oversees the mortgage giants said. 'The housing market is so important to this country,' said Lockhart. 'And to have it built on what turned out to be a shaky foundation could have caused significant financial problems.'"

"'The risk has certainly been reduced by the remedial actions that the two management teams have put in place at our direction,' Lockhart said. But it will take a number of years; two, three or more, for the two companies to get their financial houses fully in order, he cautioned."

The Motley Fool. "How the once-mighty have fallen! These events illustrate the way in which even a seemingly impregnable competitive position can deteriorate. Fannie and Freddie enjoyed a government-sanctioned quasi-duopoly; they were able to borrow at lower cost, thanks to the market's perception that its mortgage securities had the implicit backing of the federal government."

"That's not as good as actually owning a license to print money, but it's the next best thing. However, when a private-sector organization is thought to be 'too big to fail,' it creates a moral hazard by skewing the relationship between business risk and reward."

"As regulators examined the accounting violations, they found evidence of greed, mismanagement, and excessive risk-taking. They concluded that the size and leverage of the GSEs mortgage portfolios must be reduced in order to mitigate any systemic risk (a fancy way of saying that in the hypothetical event of Fannie Mae's failure, widespread disruption in the financial markets or the economy could ensue)."

"I can't find any competitive advantage, aside from favorable borrowing costs based on the perception of implicit government backing. There is no evidence that it has developed specific expertise that doesn't exist elsewhere. So when the government signals that it is uncomfortable with a guarantee that it never gave, and wants to reduce the influence of the GSEs, investors must take a hard look at these companies' business models."

And from a press release. "A delegation from the National Association of Responsible Loan Officers (NARLO), the trade association of mortgage loan originators, visited with lawmakers in Washington, D.C., to discuss loan officer issues on June 28."

"'The members of the NARLO are fed up with mortgage loan fraud and the low barriers to entry into the mortgage industry,' said Robert Skrob. 'For NARLO members, minimum licensing standards are not acceptable. We must clean up our industry.'"