Some housing bubble reports from Wall Street and Washington. "Federal Reserve vice chairman Donald Kohn said the US central bank must heed the lessons of the 1970s by keeping inflation and public expectations about inflation in check. Kohn said the US central bank had a key role to play in reassuring the American public that their spending power would not erode 'unexpectedly.'"

"'The lesson from the 1970s..is that an unchecked or permanent increase in inflation would only feedback adversely on demand for dollars,' Kohn said. 'Such an unmooring of the anchor of price stability could only elevate the odds on abrupt changes in interest rates and asset prices, instability in the US economy, and disorder in global adjustments,' he said."

From Ken Harney. "Wall Street is sounding the alarm on one of the most popular ways to buy a house in many high-cost areas around the country, so-called 'piggyback' programs."

"As of July 1, the most influential ratings agency in the mortgage arena, Standard & Poor's, has upped the ante for lenders who seek to fund piggyback deals through capital market financings. The move is likely to raise interest rates and fees for some homebuyers this summer, mortgage experts say, and could reduce the volume and availability of piggyback programs overall."

"The reason for the change is that an exhaustive study of the performance of piggyback loans found them anywhere from 43 percent to 50 percent more likely to go into default than comparable stand-alone first-lien purchase transactions."

"Piggyback plans were developed as a creative response to soaring home prices and borrowers' desires to stretch their down-payment cash. According to a study, piggybacks quadrupled their market share between 2001 and 2004. In a sample of loans in California markets the percentage of piggybacks exceeded 60 percent in some cases."

From Reuters. "The regulator for U.S. government-sponsored housing enterprises expects to complete talks on possible mortgage portfolio limits for Freddie Mac, by the end of July. Freddie Mac's portfolio in May shrank for the first time in four months, decreasing by an annualized rate of 1.2 percent to $723.1 billion. The company attributed this to lower mortgage purchases due to reduced mortgage origination volumes."

From Fitch Ratings. "Fitch acknowledges that Freddie Mac's business strategy has been undergoing a gradual shift towards increased purchases of floating-rate and alternative mortgage products, reflecting the greater significance of private-label issuances in the secondary market."

"Although fixed rate product still comprises over 60% of the total retained portfolio, the percentage of floating-rate product, particularly alternative mortgages, has been increasing."

"Fitch expects the firm to expand its acceptance of alternative mortgage product and hedging instruments. The net interest margin may remain pressured with a flat yield curve."

Also from Fitch Ratings. "While Fitch Ratings continues to project a soft landing for the U.S. homebuilding sector in the intermediate term, recent new home sales data and major builders' orders, net of cancellations, have registered sharper declines than expected."

"'Increasing credit costs and the higher energy prices will take their toll, and revenue and profit growth among the major homebuilders should slow and most often mildly decline during the second half of 2006,' said lead homebuilding analyst Bob Curran. 'Despite steady Fed increases in short-term rates, which are likely to continue in the near term, U.S. interest rates remain below the historic norm and housing activity in the aggregate has continued moderately above trend.'"