Some housing bubble news from Wall Street. "Tempe-based Clear Choice Financial Inc. announced Friday that it is insolvent, in default on several obligations and has laid off 120 of its 150 workers nationwide. The company, with corporate headquarters near Southern Avenue and McClintock Drive, also announced that it closed its mortgage-lending subsidiary, Bay Capital, which has offices in Maryland and California."

From Broker Universe. "At least two more midsized subprime firms, both non-depositories, hurt by buybacks, are considering selling their shops. (One, we're told, is owned by a large publicly traded company.) We're still checking out the particulars and hope to have confirmation next week. As one SoCal mortgage executive told us late last week: 'If you don't have liquidity, you're gone.'"

"Also in Monday's NMN a story about Clayton Holdings advising on $7 billion in loan buybacks and an article by Brian Collins on Congress holding hearings on the subprime industry and foreclosure. One due diligence expert told us wholesale lenders should hold their loan brokers responsible for their buybacks. He believes brokers have been getting away with too much for too long."

"With all the cutbacks, restructurings and failures in the subprime industry, there are a ton of account executives looking for work. CMG Mortgage president Chris George told us recently that many AEs 'are in play.'"

From Bill Fleckenstein. "A former top executive at a subprime lender told me that serious issues are developing, and that large companies like New Century Financial, Accredited Home Lenders and NovaStar Financial will, in his words, 'hit the wall' very soon."

"He writes: 'We had a loan that was FPD (first-payment default) on a home in So Cal. It is a very nice high-end town that had a section of new homes built...in the low end of town. Normal homes sold for $1 million in value. In this new seven-home development, (homes) sold for $1.3 million to $1.5 million each. The homes you had to drive through to get to this place were worth $400,000 to $500,000."

"'The market topped out, and now most of the seven homes are vacant, worth no more than $900,000. Thus, all the lenders are sitting on losses of $400,000 to $600,000. This is just one of many that are happening daily.'"

"'The commentary I am getting from field and legit brokers is that fraud is an out-of-control locomotive. Stated-income loans are now finished for all the unemployed people around. We will quickly see cash-out loans curtailed. This vicious cycle has yet to play out. We are in the second inning of the unwinding.'"

National Mortgage News. "The latest statistics from the Federal Bureau of Investigation confirm that mortgage fraud is on the upswing. 'We can't find a chart that doesn't show up in a big way,' special agent Bill Stern said at the Mortgage Fraud Conference."

"And even worse news, the FBI's mortgage fraud coordinator in Washington said, is that the trend is moving away from rogue individuals who pull off the scams and toward members of organized crime."

The Kansas City Star. "Mortgage fraud is being called the country’s fastest-growing white-collar crime. It costs lenders more than $1 billion a year and has turned increasing numbers of federal agents into experts on real estate paperwork. These days, they quickly crack cases that once took years to work, experts say."

"Two Kansas City politicians recently learned just how quickly. When then-Jackson County Executive Katheryn Shields and her husband signed paperwork selling their home, an FBI agent notified them they were the targets of a criminal investigation involving the sale."

"The documents purportedly showed that the $475,000 house they purchased in 1999 somehow was worth a $1.2 million mortgage in 2006."

"Agents also wrapped up an investigation of City Councilwoman Saundra McFadden-Weaver just months after she unsuccessfully tried to refinance a $400,000 Lee’s Summit home. According to prosecutors, McFadden-Weaver had purchased it even though she had no plans to live there or make payments."

"Mortgage fraud reports nearly doubled between 2003 and 2004, according to a Treasury Department study. That increase continued a longer-term trend that saw a 1,411 percent jump in reports between 1997 and 2005."

"Testifying before a Senate committee last month, FBI director Robert S. Mueller III estimated the loss to lending institutions at more than $1 billion a year. Others called this a conservative estimate because much of the mortgage industry was not required to report fraud."

"'We’re in our infancy in being able to quantify the problem,' said Corey Carlisle, senior director for government affairs at the Mortgage Bankers Association."

The New York Times. "In recent years, borrowers have flocked to riskier mortgages that gave them the means to keep up with an overheated housing market. Now some advocacy groups say that as delinquencies and foreclosures mount, so too will lawsuits against lenders."

"'I think a class action is coming,' said John Taylor, the chief executive of a Washington group that is an advocate for low-income borrowers. 'It’s a storm cloud that’s waiting to really open up and rain on the lenders’ parade.'"

"Many of these borrowers essentially bet that the value of their houses would climb quickly enough for them to be able to use the accumulated equity to refinance with a more affordable loan. Mortgage lenders argue that if borrowers made those kinds of speculative bets, they did so willingly."

"Ken Markison, senior director of the Mortgage Bankers Association, said lenders generally have not given payment-option ARMs to subprime borrowers and that those with better credit have used such loans successfully. 'We don’t believe there would be a basis for such suits,' he said."