Some housing bubble news from Wall Street and Washington. "Toll Brothers Inc. said it may post quarterly writedowns as high as $160 million or more, which would handily top its previous estimate for all of 2007. The home builderposted first-quarter home-building revenue of $1.09 billion, down 19% from the year-earlier period."

"The company said backlog at Jan. 31 was off 30% from a year earlier. Toll's net signed contracts were valued at $749 million, down 34%. Net of cancellations, first-quarter contracts fell 33% from the first quarter of fiscal 2006. The cancellation rate was 29.8% in the first quarter."

"'Toll's preliminary [first-quarter] results show a continuation of the weak demand that has plagued the builders in recent quarters,' wrote Nishu Sood at Deutsche Bank. 'Management's recent optimism is notably absent following [first-quarter] results that showed continued order declines, elevated cancellation rates and the likelihood of additional significant write-downs,' he added."

"Robert Toll, CEO, stated: 'Because some deals don't make sense under current market conditions, we have continued to trim our land position. We ended the quarter with approximately 70,000 lots under control compared to our peak of 91,200 at 2006's second-quarter-end.'"

"According to preliminary fiscal second-quarter figures, Orleans Homebuilders Inc. lost $7.5 million, compared to net income of $15.4 million in the year-earlier quarter. New orders were down 7 percent. Backlog was down by 52 percent and the cancellation rate was 24 percent, up from 21 percent in the year-earlier period."

"'The unfavorable market conditions in the housing industry have negatively impacted the company's new order activity,' the company said."

"The company believes that the unfavorable market conditions may continue to have a negative impact on new orders and new order pricing in the near-term, thereby further reducing future revenues, gross margins and net income."

From CNN World Business. "Europe's biggest bank, HSBC Holdings, said its charge for bad debts would be more than $10.5 billion for 2006, some 20 percent above analysts' average forecasts, due to problems in its U.S. mortgage book."

"HSBC said in a shock trading update late on Wednesday that slowing house price growth was being reflected in accelerated delinquency trends across the U.S. sub-prime mortgage market, particularly in more recent loans."

From Bloomberg. "'The impact of slowing house price growth is being reflected in accelerated delinquency trends across the U.S. sub-prime mortgage market,' HSBC said in the statement. 'It is clear that the level of loan-impairment provisions to be accounted for as at the end of 2006 in respect of Mortgage Services operations will be higher than is reflected in current market estimates.'"

"'There will be some doubt about whether this is the big provision or whether it's a sign of things to come,' said Tathagata Guha Roy, who helps manage $1 billion for Alliance Trust Plc."

"HSBC Holdings Plc CEO Michael Geoghegan is shaking up management and tightening lending policies after the bank's losses from bad home loans in the U.S. increased. HSBC made the mistake of 'going for volume' and selling second-lien mortgages, Geoghegan said. The company plans caps on riskier lending, he said."

"'The impact of slowing house price growth is being reflected in accelerated delinquency trends across the U.S. sub-prime mortgage market, particularly in the more recent loans,' the bank said in a statement."

"'over 90 percent of the portfolio is working,' Geoghegan said. 'We are taking provisions for what might happen.'"

"'The situation has deteriorated faster than we had expected and given the uncertainty regarding future house price trends and the expected further seasoning of the most recent mortgage book, we put our estimates under review,' said analysts at Goldman Sachs Group Inc."

"New Century Financial Corp., which lends money to home buyers with blemished or limited credit histories, said late Wednesday it expects to report a loss for the fourth quarter. Because of accounting errors, the company also must restate results for the first three quarters of 2006. It hopes to have that done by March 1. The mortgage lender said it didn't properly account for some of the home loans it had to buy back."

"Like many mortgage lenders, New Century doesn't keep its loans; it sells the loans to banks and investors. The deals normally have clauses allowing investors to force New Century to buy back a loan if the borrower misses an early payment."

"Loan repurchases are bad for mortgage lenders because few investors would sell back a loan unless it lost value. Piper Jaffray analyst Robert Napoli said a repurchased loan has typically lost 15 percent to 20 percent of its value."

"New Century made two accounting mistakes: It didn't assume more investors would sell back loans, even as loan repurchases surged throughout 2006 amid payment defaults. And, New Century didn't assume the repurchased loans would be less valuable."

The LA Times. "New Century said it also would write down the value of the residual interests it retains in loans that have been used to create the mortgage-backed securities that have found eager buyers around the world."

"As the housing market cooled over the last year, some lenders provided loans on overly easy terms to unqualified buyers, analysts have said. Some of these buyers, particularly those who purchased homes for the first time with low or no down payments, are believed to have stopped paying their mortgages when housing prices declined."

From MarketWatch. "The company's methodology for estimating the volume of repurchase claims to be included in the repurchase reserve calculation did not properly consider, in each of the first three quarters of 2006, the growing volume of repurchase claims outstanding that resulted from the increasing pace of repurchase requests that occurred in 2006."

"Furthermore, the loans in question were repurchased because of early-payment defaults 'by the underlying borrowers or based on alleged violations of misrepresentations and warranties in connection with the sale of these loans,' otherwise known as 'defects.'"

From Reuters. "U.S. mortgage lending practices are 'out of balance,' Sen. Christopher Dodd, chairman of the Senate Banking Committee, said. Foreclosure filings were up 42 percent in 2006 from a year ago in large part because of weakness in the subprime mortgage market, Dodd said, citing research from Realty Trac."

"Dodd said 'subprime credit can be a valuable tool in helping people become homeowners' but 'the system is out of balance.' He said he looked forward to working with brokers, bankers, regulators and Wall Street to 'restore this balance for the sake of the safety and soundness of the banking system.'"