Some housing bubble reports from Wall Street and the New York Times. "Housing bulls took heart on Dec. 27, when the Commerce Department reported that sales of new one-family homes rose 3.4 percent in November from October. But those who think that the worst may be over for the housing market should take another look at the data, economists say."

"On its Web site, the Census Bureau acknowledges: 'As a result of our methodology, if conditions are worsening in the marketplace and cancellations are high, sales would be temporarily overestimated.'"

"By how much? Economist Joseph Carson estimates that the government is overestimating the pace of annual sales by 100,000 to 150,000. Economist Mark Zandi estimates that the differential is even greater. 'Given the rise in cancellation rates, it suggests that between 150,000 and 200,000 home sales are being counted that actually did not occur.'"

"Just as the rising tide of cancellations leads the Census Bureau to overreport sales in the short term, it leads the government to underreport inventories."

From Inman News. "With the Fed continuing to express worries about inflation, there's no guarantee that short-term rates will come down."

"'Three meetings ago, bond futures traders were already pricing in a rate cut in January,' said Amy Crews Cutts, deputy chief economist for Freddie Mac. 'But the Fed pretty much said, 'Bah humbug! You're not getting a Christmas present. We're not going to cut rates anytime soon. If you're lucky, we'll leave them alone,' rather than raise rates to keep inflation in check."

"According to Kenneth Rosen, of the University of California-Berkeley, 'even a hiccup' in foreign investment will mean 'long rates go up.' 'Money is as loose as it's ever been in modern American history -- way too loose,' Rosen said. 'I can't imagine them cutting interest rates unless we have an actual recession.'"

From Bloomberg. "European Central Bank President Jean- Claude Trichet said he's optimistic Europe and Asia will be able to withstand a slowing U.S. economy and policy makers must be ready to act against any inflationary risks."

"When asked about inflation risks in the world economy, Trichet said: 'We do not declare victory, we have to remain alert.'"

"Even in the U.S., where a housing-market slump is clouding the outlook, inflation is still policy makers' 'predominant concern,' according to minutes from the Fed's December rate meeting released Jan. 3."

From National Mortgage News. "Wall Street now controls a significant portion of the nation's subprime industry. Now, there's nothing wrong with that, but Wall Street will be dictating the terms of foreclosures for thousands upon thousands of subprime borrowers who are predicted to go delinquent in the coming 24 months. And some subprime borrowers vote, but they don't donate the kind of money to Congress that the Street does."

"About three weeks ago Mandalay Mortgage of California laid off an untold number or workers. One source there told us it was the second round of layoffs for the company."

From Origination News. "Mortgage lenders cut 2,900 full-time employees from their payrolls in November, wiping out a 2,500 increase in October that established a new high for jobs in the mortgage industry. Freddie Mac estimates that originations of conventional mortgages dropped from $715 billion in the second quarter to $597 billion in the fourth quarter. For the whole year, originations totaled $2.65 trillion, compared with $3.17 trillion in 2005."

The LA Times. "When the cold call came from Ameriquest Mortgage Co., Jeff and Cheryl Busby were intrigued. The agent was a smooth talker, and the Busbys were not concerned that he didn't offer them a chance to study the documents."

"They later found that their interest rate was 11% — far too high. The agent said he would get them a better loan. The new terms were worse. The payments nearly equaled their entire income. Ultimately, they sued, saying Ameriquest had invented a car sales business for Cheryl to improve her financial status. Their lawsuit also said the agent had fabricated a higher income to 'flip' the Busbys into a bigger loan, larded with illegal charges."

"The Busbys couldn't make the payments and were forced to sell. The bungalow had been in Cheryl's family since 1935. It was 100% of the Busbys' retirement nest egg. Now it was gone."

The Houston Chronicle. "Cynthia Muir thought she got a good deal in 2003 when a friend told her that with his help she could buy a town house and sell it for a profit in six months. But the payments rarely were made, she said, and the home never was rented out."

"The FBI's Houston division has formed a unit dedicated solely to fighting mortgage fraud. Currently, the office has about 25 multimillion-dollar cases open involving various types of mortgage fraud. If left unchecked, the fraud could have repercussions for the local housing market as bankers, fearful of the growing problem, make it harder for homebuyers to get loans."

"Muir also sued the appraiser, who she claims inflated the property's value; the mortgage broker, who she alleges knew the property was overvalued; and the title company, which she claims failed to protect her."

"'I should have just never let someone be in charge of something like that,' said Muir, who acknowledged that she never saw the property before buying it. Muir paid $448,000 for her four-bedroom town house. In 2006, the Harris County Appraisal District valued the property at $298,057."

"'The industry is turning a blind eye to fraud,' said David Zugheri, a Houston mortgage broker. 'The industry is completely inside-out right now.' Experts say many Houston-area homes are being lost to foreclosure because of mortgage fraud. 'This is an epidemic that will come to roost in the Houston housing market,' said Zugheri."

"The fraud sends ripples through the economy because many loans are wrapped into mortgage-backed securities and sold to investors. If investors get wary of the investments and take their money elsewhere, banks could get more reluctant to lend and tighten lending requirements."

"'The potential does exist,' said Barton Smith, an economics professor at the University of Houston. 'We've already seen construction loans start to get hard to get. But I think the Federal Reserve's going to find out that to avoid a collapse, they'll have to back off their interest rates to provide enough liquidity to the financial system to not bring the whole stack of cards down.'"