Some housing bubble news from Wall Street and Bloomberg. "It was bound to happen sooner or later, an out-of-the-blue reminder that the froth or the boom or the disconnect between prices and fundamentals in the housing market would have a financial after-shock. HSBC Holdings dropped a small bomb last week. Yes, Virginia, subprime mortgages do carry some risk after all."

"Isolated examples? Probably not. Confined to the subprime market? Doubtful. 'There is no way the conditions that existed in the subprime market between borrowers and lenders weren't a multiple of what went wrong,' said Michael Aronstein, chief investment strategist at Oscar Gruss & Co. 'The incentives are perverse. You're paid for volume, not for being a schoolmarm.'"

"In its January survey on bank lending practices, the Fed said that a net 15 percent of domestic banks reported tightening credit standards on residential mortgage loans over the past three months, the biggest net increase since the early 1990s. That was the last time banks were saddled with, guess what?, bad real-estate loans."

"The ripple effects of the housing slowdown aren't confined to the financial sector, according to economist Asha Bangalore. 'Housing and housing-related employment made up a little over 40 percent of all payroll employment from November 2001 to April 2005,' she says. 'Employment in residential construction declined in nine out of the 10 months ended January 2007,' according to the Bureau of Labor Statistics."

"Only three years ago, former Fed Chairman Alan Greenspan said homeowners could have saved a heck of a lot of money had they opted for adjustable-rate mortgages during the past decade."

"'American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed- rate mortgage,' Greenspan said in a speech to the Credit Union National Association in Washington."

"Lenders took his advice. Borrowers jumped at the opportunity. Everyone may suffer the consequences."

"Merrill Lynch CEO Stanley O'Neal was willing to lose $230 million to catch Bear Stearns Cos. and the shakeout is just beginning. That's because Merrill is determined to capture a dominant share of trading in bonds backed by home loans."

"'You've got to remember' that Bear Stearns, the perennial leader in mortgage bonds, 'got into this business at the height of the boom, when you could not lose,' Angelo Mozilo, Countrywide Financial Corp.'s CEO, said. 'The real test will come for these new players in how they do in this new cycle,' Mozilo said. 'A couple may do fine and a couple won't do fine. Just because it's Wall Street and they've got into the origination business doesn't mean they automatically win.'"

"'We still have way too much capacity,' said David Olson, the former director of market research at Freddie Mac. 'That means a lot more firms have to go out of business.'"

"With more than 8,500 financial institutions competing for mortgages, many began extending them to borrowers who might not have qualified previously. 'Too many firms got involved in making loans probably motivated in part by fees,' Federal Reserve Bank of St. Louis President William Poole told reporters after a speech last week. 'They thought they could lay off the credit risk by securitizing and selling these off in the market.'"

"Bear Stearns reduced its purchases of subprime loans by half last year because of concerns over the decline in credit quality, President Warren Spector said on a conference call. That's not to say Bear Stearns is backing away. Last week, it completed the $26 million purchase of Encore Credit Corp., the subprime home-lending unit of Irvine, California-based ECC Capital Corp."

"ECC Capital Corporation today announced the closing of the sale of its mortgage banking business to Bear Stearns. A significant portion of ECC Capital's portfolio of loans held for sale, totaling approximately $1.2 billion, was included in the Loan Sale that also closed on February 9, 2007."

"Certain of the loans included in the Loan Sale were sold at substantial discounts due to early, curable payment defaults and documentation and related defects that may be resolved so as to increase or decrease the purchase price to be paid by Bear Stearns."

"ECC Capital closed the sale of certain residual interests in a securitization on February 9, 2007 at a price that resulted in a $10 million loss."

"Home builders are confronting their own problems, as shown in Toll's results, which showed that orders sank 33 percent in the first quarter while revenue from home construction dropped 19 percent."

"Falling prices for land are also weighing on the industry. The five largest U.S. builders, Horton, Pulte, Lennar, Centex and Toll, recorded a total of $1.47 billion in related costs for the fourth quarter."

"There may be more bad news to come as well. The National Association of Realtors said last week that sales of new homes would decline until the fourth quarter because too many had been built."

"U.S. profits increased at the slowest pace in more than four years last quarter because of a record loss at Ford Motor Co. and earnings declines at Occidental Petroleum Corp. and Pulte Homes Inc. The biggest slump in home sales in 15 years battered homebuilders including Pulte."

"'Despite what people might say in terms of the bottoming in the housing market, if we are at the bottom, we're not going to get off this bottom for at least a year or two,' said Ernie Ankrim, chief investment strategist at Russell Investment Group."

"The consolidation wave sweeping through the mortgage sector showed no signs of abating. Lenders Direct Capital Corp. stopped taking applications from mortgage brokers as of Friday, the company's chief executive officer, told MortgageDaily.com."

"The lack of 'investor demand in subprime industry is such that we felt it was prudent to do it at this time,' he said. 'The liquidity of subprime loans seems to be in a state of flux.'"