Readers suggested a topic on subprime loans and responsibility. "A member of the Fed’s Board of Governors is coming to Tucson next Thursday. 'Economic Outlook and Developments in Mortgage Markets' series presents Susan Bies, member of the Board of Governors of the Federal Reserve System. The lecture and reception following are free and open to the public.'"

"'I’m tempted to go and raise the following questions during the Q&A period: 1. Isn’t it a little late to be concerned about subprime lending now? 2. Why didn’t the Fed take the punchbowl away three years ago?'"

Another had this link. "Is she going to warn about the perils of subprime borrowing? 'Federal Reserve Governor Susan Bies said on Thursday looser underwriting standards were partly responsible for recent rises in late mortgage payments and that lenders should tighten risk management practices.'"

"Bies noted that banking regulators had advised lenders last September to beware of the risks associated with nontraditional loans. She said supervisors 'are concerned that current risk-management practices may not fully address the entire set of risks inherent in nontraditional mortgages -- risks that could be heightened by current market conditions.'"

Another noted, "Home prices are dancing on a rotten, collapsing floor of subprime debt."

A reply, "Well I’ve been saying that if the landing seems soft it’s because the floorboards are rotten."

The Hartford Courant. "Executives at Mortgage Lenders Network have always been upbeat and optimistic about the company's future, but on Thursday they sat sober-faced, determined to save their company from the biggest setback in its 10-year history."

"Mortgage Lenders is the latest company to get caught in a downdraft in the 'sub-prime' mortgage industry, which has been slammed with rising delinquencies and defaults. Mortgage Lenders is not a bank, so it must secure lines of credit from financial institutions."

"The companies providing the lines of credit started getting nervous in late December about the problems across the subprime industry. Mortgage Lenders was having a harder time selling loans to wary investors. And two months earlier, in October, Mortgage Lenders was forced to sell hundreds of millions in loans at a loss because they had been closed at rates well below what the market was averaging, President Mitchell Heffernan said."

"'They saw that, and it all started to snowball,' Heffernan said."

From Bloomberg. "Mortgage Lenders Network said 'human error' caused it to lend $600 million at below-market rates, fueling losses that led to the closure of its biggest unit."

"'The economics of the market went upside-down,' Heffernan said. 'We could continue to go down the path of funding loans at a loss or we could exit the market completely.' The company furloughed about 900 of its 1,800 employees for two weeks."

The Tribune Review. "Pennsylvania's Department of Banking is taking action to head off a trend the state can't be proud of, one of the nation's highest mortgage foreclosure rates. The department has told mortgage bankers and brokers they are subject to license suspensions, revocations and nonrenewals if consumers are mistreated, such as enticing them to agree to a mortgage they can't afford."

"'The policy statement is good for the industry,' said Michael Flynn, president of the state Mortgage Bankers Association's Southwest Chapter. 'Laying out guidance is a good thing, but where's the enforcement?'"

The Rocky Mountain News from Colorado. "Attorney General John Suthers, teaming with a couple of legislators, is promoting a bill aimed at cracking down on the fraud that results in unjustified housing loans and subsequent foreclosures."

"We hope the bill does some good. After all, Colorado is said to have a disproportionate share of foreclosures. Still, we can't help but feel that it's as much political grandstanding as substantive reform. As one critic says, going after appraisers is just 'nibbling around the edges.'"

"The fact is there are already plenty of laws, federal and state, aimed at fraud in the mortgage business. But prosecutors at both levels of government have been reluctant to take on the cases - despite repeated pleading."

"Former Sen. Bill Armstrong, who's been in the mortgage business, believes the new laws will do little good because they don't go to the root of the problem. 'It's nothing but political hot air,' he says."

"The larger problem, he argues, is government-guaranteed housing loans."

"'Our government encourages people to get into deals they can't afford,' he says. In order to expand home ownership, the VA and the FHA put people into houses with little or no down payment. It may be a legitimate public policy, he says, but if you accept it, you'll have to accept the high foreclosure rates as well."

"'If it weren't for the government guarantees very few of these loans would get made,' Armstrong argues. The policy encourages plenty of scam artists who are eager to help foolish borrowers leap into the quicksand."

"John Head, an attorney familiar with the industry, says enorcement is lax because the lending agencies quickly sell the loans and they end up on Wall Street as part of an investor's portfolio, an investor who has no idea default is likely. Once the loan is upstream the original lender doesn't care what happens. Head suggests the federal government should change its policies so that if there's a default on a loan, it gets charged back to the original lender."