Some housing bubble news from Wall Street and Washington. BBC News, "DR Horton chief executive Donald Tomnitz told investors that the weak US housing market would continue to hit home prices during the year. 'I don't want to be too sophisticated here, but '07 is going to suck, all 12 months of the calendar year,' he said."

"The company's net income for the three months to the end of December 2006 fell to $109.7m (£56.7m), from $310.1m at the same time the previous year. Mr Tomnitz warned that DR Horton may have to make further write-offs to reflect the number of unsold homes and lower land values."

"'I don't think '08 is going to be a great year, but it's going to be much better than '07,' he added."

From Business Week. "The canaries in the coal mine are keeling over fast. After years of easy profits, the $1.3 trillion subprime mortgage industry has taken a violent turn."

"Now there's evidence that the pain is spreading to a broad swath of hedge funds, commercial banks, and investment banks that buy, sell, repackage, and invest in risky subprime loans. According to Jim Grant of Grant's Interest Rate Observer, the market is starting to wake up to the magnitude of the problem, entering what he calls the 'recognition stage.'"

"Says Terry Wakefield, head of the Wakefield Co., a mortgage industry consulting firm: 'This is going to be a meltdown of unparalleled proportions. Billions will be lost.'"

"BusinessWeek has learned that $700 million Carrington Capital and $3 billion Greenlight Capital may have gotten badly burned because of their intricate dealings with New Century Financial."

"Magnetar Capital, a $4 billion hedge fund formed two years ago, may be on shaky ground, too. The question is, how many others may be suffering? 'This is a very opaque industry, so no one really knows,' says economist Mark M. Zandi. 'My guess is that if you look at the top hedge funds, they're bearing most of the risk.'"

"Among hedge funds, Greenwich (Conn.)'s Carrington seems particularly vulnerable. The fund was launched in 2003 with $25 million in seed money from New Century, which owns about a 35% equity stake. Not surprisingly, New Century is one of Carrington's biggest suppliers. Another major supplier is Fremont General (FMT), which says it plans to exit the subprime business."

"Other hedge funds that have feasted on mortgage-backed securities will be hit hard if rating agencies start downgrading them, as is widely expected. That would be likely to send their values plummeting."

"'This is indeed a stress scenario,' says Glenn T. Costello, co-head of the residential MBS Group at Fitch Ratings. Kevin Kanouff, who heads bond surveillance for Clayton Holdings, a consulting firm for institutional investors, adds that 'hedge funds are getting very nervous about their investments.'"

"The biggest fear is that the trouble will move up the food chain. While subprime loans accounted for 20% of mortgages originated last year, David Liu of UBS estimates that fully 40% of last year's loans are 'showing a lot of signs of stress.'"

"One clear loser is David Einhorn, manager of hedge fund Greenlight Capital, who made a big, ill-timed gamble on the subprime sector when he fought his way onto New Century's board last March. Einhorn's seat on New Century's board prohibited him from selling."

From Reuters. "Hedge fund manager David Einhorn quit New Century Financial Corp.'s board late Wednesday. In Thursday's SEC filing, Greenlight said it had not sold any New Century shares in the previous 60 days, a period in which the shares fell 83 percent."

"The U.S. Federal Deposit Insurance Corporation on Wednesday issued a cease-and-desist order against Fremont General Corp. because of its subprime mortgage and commercial real estate lending practices."

"The FDIC, a banking regulatory agency, said Fremont was operating without effective risk management policies and procedures and was marketing loans that substantially increased the likelihood of a borrower's default."

"'Our concern has always been that banks make loans that borrowers are able to repay,' FDIC Chairman Sheila Bair said."

"The company said this week that it stopped making new home loans and would not fund home loans in the pipeline that had not yet closed."

The Associated Press. "The FDIC said it found, among other things, that the bank was making subprime mortgage loans without having the proper criteria for assessing borrowers' ability to repay, and that it was marketing and making the loans 'in a way that substantially increased the likelihood of borrower default or other loss to the bank.'"