Some housing bubble news from Wall Street. "Major financial firms like Merrill Lynch, which bought large amounts of high-risk, high-return mortgage loans in 2005 and 2006, are now trying to force the firms that originated those loans to buy them back, The Wall Street Journal Online reported. The moves reflect the increasing numbers of Americans who are falling behind in their mortgage payments."

From Reuters. "Standard & Poor's said it may downgrade ratings on 18 securities from 11 mortgage-backed bond issues sold by units of companies, including Goldman Sachs Group Inc. and New Century Financial Corp.."

"The bonds are backed by subprime and second-lien mortgages, and so-called alt-a loans, whose credit is considered between prime and subprime, S&P said."

"'Many of the 2006 transactions may be showing weakness because of origination issues, such as aggressive residential mortgage loan underwriting, first-time home buyer programs, piggy-back second-lien mortgages, speculative borrowing for investor properties, and the concentration of affordability loans,' S&P said in a statement."

"The percentage of loans in the pools that are severely delinquent range from 2.77 percent for Terwin's 2006-8 issue to 13.46 percent for New Century's 2006-S1 deal, S&P said."

The North County Times. "Accredited Home Lenders Holding Co., which sells mortgages to customers with poor credit, on Wednesday reported a loss of $37.8 million for the fourth quarter of 2006."

"The company's financial performance, combined with the declining subprime lending market, has led Accredited to put a stronger emphasis on screening subprime borrowers to make sure that they can repay their loans, the company said Wednesday."

"Joseph Lydon, the company's COO, speaking during a telephone conference, said that the subprime market could get worse before it gets better. 'Unless the market moves the way it should, there will be plenty of additional blood flowing in the streets,' he said."

"Keith Gumbinger, a VP at the mortgage research firm HSH Associates, said the declining housing market, combined with loose lending standards during the last two years, have come back to haunt the subprime market. However, he said, the current industry troubles could be beneficial in the long term."

"'We are going to see more losses as 2007 goes on, (and) more companies could close their doors,' he said. 'This is the first step toward getting back to lending sanity.'"

"Gumbinger said no one should be surprised that subprime customers are defaulting on loans: 'They got that way for not paying their bills in the first place.'"

The Union Tribune. "'We have been making adjustments to the products we offer as well as processes and underwriting discipline,' said Joseph Lydon. 'We recognize the market we're in, and we believe credit quality has to be the No. 1 priority.'"

"The question for the housing industry is whether the troubles in subprime lending will spill over into more conventional mortgages. If they do, lenders could tighten credit standards for borrowers...and that could hurt not only first-time buyers but also people who recently purchased homes using hybrid adjustable rate mortgages with the idea of refinancing."

"Nationwide, between $1.1 trillion and $1.5 trillion in hybrid adjustable mortgages are scheduled to reset this year, according to the Mortgage Bankers Association. With little or no price appreciation in the past year, it may prove difficult for these borrowers to refinance out of their hybrid loans if lenders boost credit standards."

"During the housing boom, scores of lenders entered the niche business of making loans to borrowers with tarnished credit. The increased competition for loans led to easy credit. There are only so many people in that market, said Lou Galuppo, at the University of San Diego. 'The only way to enlarge the market is to drop the (credit) score.'"

"'I just don't think there's a whole lot of room for anyone in the business to continue to book bad loans,' Lydon said. 'The buyers of the loans are putting them back fairly quickly' if they default."

From Bloomberg. "Former Federal Reserve Chairman Alan Greenspan said the U.S. housing slowdown may be coming to an end, citing sales of new homes. 'I think the worst is behind us,' Greenspan told a Toronto conference."

"'The worst of the adjustment is over, meaning not that the market is turning,' Greenspan said, 'but that the rate of decline was at its maximum in the third quarter and continued over in the fourth quarter and should now be moving to a much less negative direction.'"

"Greenspan also said 'disarray' in the U.S. subprime mortgage market, which serves borrowers with weak credit who typically pay higher interest rates, isn't likely to create greater financial instability in the rest of the economy."

"'We do have a problem here; it's probably not over,' Greenspan said. 'It may actually infect some parts of the prime mortgage market, but there's no real evidence that this is a significant issue.'"

"The slump in housing deepened in the final three months of last year with sales falling in 40 states and median home prices declining in nearly half of the metropolitan areas surveyed, a real estate trade group reported Thursday."

"The National Association of Realtors report showed that the biggest declines were in former boom areas."

"Median home prices fell in 49 percent of the 149 metropolitan areas surveyed in the fourth quarter, compared to the same period a year ago. That was the largest percent of metro areas reporting price declines since the Realtors began tracking price data in 1979.'

"David Lereah, chief economist for the Realtors, said he believed the data shows that housing, which had enjoyed a five-year boom, was bottoming out in the final three months of last year."

"'This information confirms 2006 was the year of contraction and hopefully the fourth quarter was the bottom,' Lereah said. 'When we get the figures for this spring, I expect to see a discernible improvement in both sales and prices.'"