Some housing bubble news from Wall Street and Washington. "H&R Block Inc. said Thursday it swung to a loss in the third quarter as the company's troubled mortgage lending arm offset a strong beginning of the tax season. H&R Block last year announced it was considering selling Option One, which has been plagued since last summer with falling profits and delinquent loans to 'subprime' customers."

"'It's headed clearly for a sale," said Mark Ernst, the company's CEO, adding that he expected Option One to sell for at least its $1.3 billion book value. The mortgage business lost $69.7 million during the quarter. The company said it was setting aside $111 million to its reserves for expected loan losses."

From Business Week. "H&R Block Inc. management may be confident it can sell its Option One mortgage unit for $1.3 billion by the end of next month, but while that stance may be 'encouraging,' a CIBC World Markets analyst said Friday, 'it was not entirely convincing.'"

"(The company) didn't fully address that public perception (regardless of reality) may influence the bids proposed by its sophisticated suitors,' CIBC analyst Scott Schneeberger said. 'Moreover, HRB noted that no official bids had yet been made.'"

From Bloomberg. "H&R Block took a $102 million charge for mortgage losses in its first fiscal quarter. At the time, Ernst said it would be a one-time cost that would cover all loans made in the past, and he didn't expect similar write-offs in the future."

"'Until it's sold, the mortgage unit will weigh down on earnings,' UBS AG analyst Kelly Flynn said. Rising defaults are plaguing U.S. home lenders, and Flynn said H&R Block may not be able to sell the unit at all."

From MarketWatch. "Impac Mortgage Holdings Inc. said that it swung to a net loss of $54.2 million, or 71 cents a share. Interest income edged down to $329.1 million, from $340.7 million, while interest expense rose to $334.4 million, from $326.2 million."

"'Although we are disappointed by our earnings performance in 2006, our results are to some extent indicative of market conditions, as well as strategies implemented early in the year to reduce originations and our exposure to inferior credit quality mortgages,' it said."

"Impac said recent trends in the performance of its long-term investment portfolio have been more favorable, but earnings in 2006 continued to be pressured as the Federal Reserve increased short-term interest rates through the first half of the year."

"The company also noted that average securitized mortgage collateral declined as Impac tightened underwriting guidelines and adjusted pricing to reduce loan production and limit the company's exposure to deteriorating credit trends in the mortgage market."

"The perceived risk of owning low- rated subprime mortgage bonds rose to a record for a fifth day after Moody's Investors Service said it may cut the loan servicing ratings of five lenders."

"'I do not think it is surprising we have trouble in this sector of the market; I think the surprise is the speed at which it has unfolded in the last couple of months,'' said Mary Miller, director of fixed-income at T. Rowe Price Group."

"'Protection-sellers largely have stepped away until the market settles down,' Peter DiMartino, asset-backed securities strategist at RBS Greenwich Capital, wrote. 'Recent mini-rallies were just a few brave souls hoping they could actually catch the falling knife.'"

"New series of ABX indexes are created every six months by securities firms. They indicate prices for default swaps linked to 20 bonds, not prices for swaps on each."

"The BBB- rated portions of ABX contracts are 'going to zero,' said Peter Schiff, president of Euro Pacific Capital. 'It's a self- perpetuating spiral, where as subprime companies tighten lending standards they create even more defaults' by removing demand from the housing market and hurting home prices, he said."

"ResMae Mortgage Corp. may be on the cutting edge of a trend in the U.S. subprime-loan industry. It's bankrupt and selling assets for pennies on the dollar."

"ResMae, which made home loans to people with bad credit, will be auctioned off next week. The opening bid, by Credit Suisse Group, is $19.1 million, less than half the size of an offer received by ResMae before it went bankrupt Feb. 13."

"More than 100 other lenders will go out of business this year, said Doug Duncan, chief economist of the Mortgage Bankers Association in Washington. Many will be subprime lenders, victims of loans to borderline borrowers last year."

"'Loans in 2006 will be the worst we have ever seen in the business,' said Matthew Howlett, an analyst who covers the subprime market for an investment bank. 'The underwriting quality was disastrous.'"

"In mid-2005, ResMae received a premium of two to three percentage points on the face value of every loan it sold, according to its bankruptcy filing. By late 2005, the premium narrowed to zero to one percentage point."

"Because ResMae's cost to originate a loan was two percent to 2.5 percent of the face value, it began losing money on every transaction, its filing said."

From CNN Money. "Late payments for residential mortgages shot up by 15.6 percent in the fourth quarter, U.S. regulators said on Thursday. The Federal Deposit Insurance Corporation said the increase in late mortgage payments followed a 5.2 percent increase in the third quarter."

"Noncurrent mortgage loans, payments that are more than 90 days late, grew by $3.1 billion in the last three months of 2006 after rising by $974 million in the third quarter, the FDIC said."

"Richard Brown, FDIC's chief economist, said regulators are seeing emerging signs of distress among subprime loans, especially with hybrid mortgages that subject borrowers to higher monthly payments after introductory interest rates."

"'While the degree of credit distress in these portfolios is still well below the peaks that we saw during and after the 2001 recession, it seems likely that their performance will get worse before it gets better,' Brown said."

"'The banking industry continues to perform well, even as ... a weakening mortgage market (has) made the operating environment more challenging,' FDIC Chairman Sheila Bair said. While banks and savings institutions generally are in sound financial condition with adequate capital, she said, 'bankers and regulators should ensure that risk-management practices are also equal to the challenges.'"

"Writeoffs of home mortgage loans by banks and thrifts totaled $888 million in the October-December period, a three-year high, according to figures in the FDIC's quarterly banking profile."