Some housing bubble news from Wall Street and the Washington Post. "With college costs looming for their four children, Bryan and Susan Andrews were looking for a way to cut their monthly expenses. The sales pitch that came in the mail seemed perfect: A mortgage at 1.95 percent, fixed for five years."

"But after the deal closed, in 2004, the couple realized to their horror that the $191,000 loan they got from Bethesda-based Chevy Chase Bank was an adjustable-rate mortgage. They went to court, saying they were deceived. A federal judge has sided with the couple and is allowing a class-action suit involving up to 7,000 borrowers against Chevy Chase."

"Last month, U.S. District Court Judge Lynn Adelman...ruled that while the borrowers were not eligible for damages, they could be permitted to turn back or 'rescind' their mortgages. Recision would permit borrowers to be released from the loans, receive reimbursement of any interest they paid to Chevy Chase and get back their closing costs, too."

"In other words, the ruling may give some borrowers a refund of everything they have paid to live in their houses for years."

"The case worries the lending industry because of the potential for hefty losses if other borrowers are allowed to rescind mortgages they claim were misleading."

From Reuters. "Mortgage Lenders Network USA Inc. on Monday filed for Chapter 11 bankruptcy protection, becoming one of the largest casualties among lenders to people with poor credit histories as the U.S. housing market slows."

"'Lenders may be having trouble finding white knights, whether to fund their operations or provide warehouse lines of credit,' said Keith Gumbinger, a VP at a mortgage information publisher. 'More trouble is likely in 2007.'"

"'Recently originated loans are falling into default much more quickly than lenders expected,' Gumbinger said. 'It's tough to tell which lenders are most vulnerable, because underwriting standards are not transparent enough.'"

"Economic development assistance that had been sought by Mortgage Lenders to build a Wallingford campus was halted last month. James Watson, a spokesman for the state Department of Economic and Community Development, said Monday that any aid package is now dead because it was based on a pledge by Mortgage Lenders to create 1,000 jobs."

"Instead of creating jobs, Mortgage Lenders has left hundreds unemployed."

From Origination News. "Mortgage lenders dropped 6,500 full-time employees from their payrolls in December. The U.S. Bureau of Labor Statistics reported that employment in the mortgage banking/broker sector declined from 501,200 in November to 494,700 in December."

"The BLS also revised downward the November and October job numbers, and the statistics now indicate that the industry cut 10,000 employees during the last two months of 2006."

From Business Week. "FirstFed Financial Corp. may be the riskiest mortgage lender around. In the fourth quarter, mortgage originations plummeted by 66.8%, to $365 million—one of the steepest declines among all lenders."

"Cash from operating activities dropped into the red in the third quarter (the most recent data available), falling from $49 million in 2005 to negative $77.1 million a year later. Meanwhile, the number of problem loans more than quadrupled last year."

"The biggest problem: Its mortgage portfolio is packed with risky loans known as option ARMS. All of FirstFed's mortgages are for homes in California, where prices have cratered and foreclosures have skyrocketed. Also, 80% of its loans have little or no documentation to prove the borrower's income or assets, according to a recent company presentation."

"The bulk of FirstFed's income is derived from noncash earnings, largely from the deferred principal on its option ARMs. That so-called negative amortization constituted $223.9 million, or 68.4%, of the bank's income before taxes in 2006, compared with 1.3% in 2004. In essence, FirstFed is booking profits on money it hasn't collected."

The Associated Press. "Due mostly to the slowdown in new home construction, lumber prices have sunk from a peak of about $1,000 per thousand foot board 18 months ago to around $200 per thousand foot board. In addition, prices for oriented strand boards, or OSB, are at a four-year low."

"Lumber and building materials supplier Louisiana-Pacific Corp. on Tuesday posted a fourth-quarter loss due to feeble demand from home builders in the sluggish U.S. housing market."

"'Fourth-quarter sales declined 40 percent compared to the same quarter a year ago, as levels of building activity dropped to the lowest levels we have seen this decade,' said CEO Rick Frost. 'Weakened demand negatively affected volume and pricing in all of our product lines.'"

"Frost cautioned that the first quarter this year 'looks and feels a lot like last quarter, with lower building activity and depressed prices for our commodity products continuing.'"

"Building Materials Holding Corporation, a leading provider of construction services and building materials to professional residential builders and contractors, today reported sales for the fourth quarter of 2006 decreased 26% from the same quarter a year ago."

"Robert E. Mellor, CEO, stated, 'Our fourth quarter results reflect the on-going correction of inventory levels which currently overhang the housing market. The rapid deterioration of our markets during the second half of the year has made for a very challenging quarter as homebuilders curtail production while excess inventory is absorbed.'"

"Mueller Industries Inc., a maker of copper tubes and fitting used in plumbing and refrigeration, said Tuesday the slumping housing market and lower copper prices led to an inventory write down, sending fourth-quarter profits tumbling."

"The latest quarter included a charge of 26 cents per share to write down inventory that lost value as copper prices fell during the period. Mueller said the slumping housing sector also hurt sales volume."

"D.R. Horton Inc., the largest U.S. home builder, on Monday said net sales orders in January continued to fall compared with a year ago, but its cancellation rate for the month was about the same as that seen in the most recent quarter."

"The industry-wide softening of demand for new homes which began in fiscal 2006 has continued into fiscal 2007. In many markets, home price appreciation over the past several years had hurt the ability of some potential homebuyers to afford a home, but the price appreciation had also attracted real estate investors and speculators to the new and existing home markets."

"As price appreciation slowed, the demand from investors and speculators for new homes also slowed, resulting in an increase in new homes available for sale. At the same time, existing homes offered for sale by investors and speculators increased."

"In response to higher inventories of both new and existing homes, homebuilders increased the use of sales incentives to continue to sell new homes. During the three months ended December 31, 2006, we have continued to experience a decrease in our net sales orders due to a decline in homebuyer consumer confidence and continued elevated levels of sales contract cancellations."

"Our use of incentives also contributed to significantly lower gross margins on the homes we closed during the quarter. We cannot predict the duration or severity of the current market conditions."

"The value of net sales orders decreased 28% for the three months ended December 31, 2006, from the same period of 2005. The number of net sales orders decreased 23% for the three months ended December 31, 2006 compared to the same period of 2005."

"Our cancellation rate during the quarter ended December 31, 2006 was 33%, which exceeded our typical historical range of 16% to 20%, but improved from our cancellation rate of 40% in the fourth quarter of fiscal 2006. A significant portion of the increase in cancellations above historical levels was due to our prospective homebuyers being unable to sell their existing homes."

"The average price of a net sales order in the three months ended December 31, 2006 was $261,400, a decrease of 5% from the $276,300 average in the comparable period of 2005. During the three-month period, the largest percentage decrease occurred in our Southwest region, due primarily to price reductions and increased incentives in the Arizona markets."

"Our net sales orders for the month ended January 31, 2007 decreased as compared to the same period in 2006 at a greater rate than the 23% decrease we experienced in our most recent quarter. Our cancellation rate for the month ended January 31, 2007 was similar to our cancellation rate during our most recent quarter."