Some housing bubble reports from Wall Street and the Washington Times. "The risk of a financial crisis is growing as home prices continue to fall and questionable mortgages made in the past two years go into default, finance officials warned yesterday."

"Banks and mortgage brokers have been passing along to unwary investors as much as $600 billion a year in risky mortgages they made through untested channels in the junk-bond market. That raises the threat of a financial crisis beyond the ability of the Federal Reserve to remedy, said Lewis Ranieri, who is widely credited with creating the multitrillion-dollar market for mortgage-backed securities in the 1980s and 1990s."

"'No securities market can stand if we do not have true disclosure, and we do not have true disclosure' of the growing risks of exotic mortgages, said Mr. Ranieri. 'This stuff doesn't just get sold to [professional] money managers. It gets sold to the public and to foreign investors who don't have a clue what to look for.'"

"Despite the growing dangers, Rep. Barney Frank, incoming chairman of the House Financial Services Committee, indicated he saw no reason for federal legislation to better regulate the mortgage markets to prevent a possible financial meltdown."

"'Housing suffered from irrational exuberance' during the first part of the decade, though it fell short of being a full-blown bubble, he said. 'The end result of a 10 percent drop in many parts of the country will be a more rational housing market. ... If a few speculators get burned, that's just icing on the cake.'"

"Treasury Secretary Henry Paulson said the government wants to issue guidelines to banks and savings and loans that will allow people to get home loans 'without taking unnecessary risks.'"

"'We do not want Americans to become overextended and see their dream end in foreclosure,' Paulson said."

"There have started to be 'early signs of credit distress' in financial institutions' holdings of so-called 'subprime' mortgages, especially in California, Richard Brown, chief economist for the Federal Deposit Insurance Corp., said at the conference."

"As the housing market trends downward and overextended borrowers find it increasingly difficult to make their mortgage payments, delinquencies, foreclosures and early payment defaults are on the rise, said Dominion Bond Rating Service in a report."

"When looking at 60-days-plus delinquencies for 2003 through 2006 subprime home equity collateral at 11 months of seasoning, delinquencies are 25 percent higher for the 2006 vintage versus the 2005 collateral and approximately 66 percent higher versus 2003 and 2004 vintages, said Dominion in the report."

"The weaker performance of the 2006 vintage can be attributed to...greater leverage inherent in 'affordability products,' the migration of lenders down the credit spectrum and the sharp decline in home price appreciation rates."

"In order to support corporate earnings and maintain production volumes that had reached unprecedented levels, subprime originators continued to underwrite 'affordability products' and the corresponding 'loan at the margin,' the rating service added."

"Fitch Ratings said its ratings outlook for sub-prime mortgage bonds is 'negative,' with the expected number of its downgrades to exceed the number of upgrades next year. Delinquencies, which have risen 50 percent from last year, should climb another 50 percent next year, it said."

"Losses to date on sub-prime mortgages issued in 2000 are about 5.5 percent, the worst tally ever, according to Michael Youngblood, an analyst at Friedman Billings Ramsey Group Inc. Youngblood has said this year's loans could have the highest losses ever."

"A large caliber weapon would be needed if losses on the recent crop of exotic, nonconforming mortgages (i.e., loans not guaranteed by Fannie Mae or Freddie Mac continue to work higher. And why wouldn't they?"

"In 1998 'liars' loans' (those with little or no documentation required) amounted to 24% of mortgage originations. To date this year they account for 62%. Interest-only mortgages have vaulted in the same period from virtually no market share in the mainstream lending business to a 50% share."

"Countrywide Financial released operational data for the month ended November 30, 2006. Mortgage loan fundings for November totaled $38 billion, a decline of 11 percent from November 2005."

"'November 2006 operational results continued to reflect transitional market conditions,' said CEO Angelo Mozilo. 'Total mortgage loan fundings declined modestly from the prior month. Purchase volume fell as a result of continued softness in the housing market, as well as seasonality.'"

"Potlatch Corporation will cash in on the nation’s growing appetite for recreational acreage by selling off 18 to 20 percent of its vast timber holdings over the next decade, officials said today. The company expects to sell between 15,000 and 20,000 acres of land next year."

"Over the next decade, Potlatch has identified 100,000 to 120,000 acres for sale in Idaho; 100,000 to 120,000 acres for sale in Minnesota; and 50,000 to 60,000 acres for sale in Arkansas."

"Investors who giddily rushed into the new-home market during the recent housing boom are now beating a hasty retreat, sometimes at a hefty loss, said David Pressly Jr., president of the National Association of Home Builders."

"For some speculators, it makes more financial sense to leave a down payment on the table rather than going to settlement on a newly constructed house that has decreased in value or failed to appreciate. 'It might be cheaper to walk away and not close on a house they may not be able to sell or rent,' said Pressly."

"Some would rather give up sizable down payments than be stuck with a house bought at the top of the market, Pressly said. Consider an investor who puts $30,000 down on a new $500,000 house, either under construction or not yet built. For such a buyer, it might be cheaper to default on the sales contract, Pressly said. Losing $30,000 might seem the lesser of two evils, he said."