Some housing bubble news from Wall Street and Washington. "Beazer Homes USA Inc. said late Thursday that it got a grand jury subpoena demanding documents relating to its mortgage origination business. Several major home builders also operate finance companies to help customers buy their houses. Those businesses and the broader home-lending industry have been under scrutiny lately as defaults among the riskiest of those loans, called subprime, have spiked."

"Lerach Coughlin Stoia Geller Rudman & Robbins LLP today announced that a class action has been commenced on behalf of purchasers of Beazer Homes common stock during the period between July 27, 2006 and March 27, 2007."

From Bloomberg. "U.S. homebuilders may trigger a 'correlation crisis' similar to the credit sell off in 2005 when Ford Motor Co. and General Motors Corp. lost their investment-grade credit ratings, according to Bank of America Corp."

"'We see increasing risk signals that remind us of the run- up to the 2005 correlation meltdown,' the analysts wrote. Investors may demand a higher premium for holding the equity tranche related to the benchmark investment-grade credit- default swap index, should the cost of contracts on homebuilders in the index rise, the analysts said."

"'We would not be surprised to see a potential dramatic increase in the premiums required by equity tranche holders to hold first-loss risk,' the analysts wrote. 'A reversal in the current demand for equity tranche protection could send investment-grade index spreads significantly wider.'"

From CNN Money. "On Tuesday, Lennar CEO Stuart Miller told investors on the company's conference call that some markets were still seeing declines, according to Reuters. That comment and other recent signs probably mean the industry is still a long way from the bottom, said Morningstar analyst Parrish Glover."

"'There's a reason why D.R. Horton's CEO said, '07 is going to suck', Glover told CNNMoney. 'We're not even expecting a recovery in the next 18 months. Even for the next three to five years, we're not looking at an especially robust market.'"

"'This kind of bull market that's deflating is something that comes around once every 20 years,' he said."

From Reuters. "'2006 may prove to be the worst subprime vintage ever,' said Roelof Slump, a U.S.-based managing director for (Fitch Ratings), adding that he expects losses of between 6% and 8% in the value of these bonds."

"Slump told Reuters that problems in the subprime housing market could have an impact on the overall housing sector in the United States. 'We do believe that the very same things that are happening in the subprime market are likely to be happening in the Alt-A market, again driven by home prices.' he said."

The Financial Times. "Credit Suisse has filed lawsuits against at least three US subprime mortgage lenders, marking an escalation of efforts by Wall Street banks to use legal action to purge themselves of bad housing loans."

"DLJ Mortgage Capital, a unit of Credit Suisse, is separately suing the three mortgage companies. EMC Mortgage Corp, a unit of Bear Stearns, has filed at least one $70m lawsuit against a lender. Other suits are expected. The legal action comes as Wall Street seeks to limit damage from the subprime collapse."

"In one instance, cited in the case against Infinity Home Mortgages, DLJ claims it bought four mortgage loans totalling $838,000 made to an individual borrower for three properties on the same street in Irvington, New Jersey. DLJ bought the loans from Infinity between March and April 2006, and claims that the individual failed to make payments on three of the mortgages in May."

"'I can't believe there is a soul that has been dealing in mortgage sales to Wall Street that hasn't run into early payment default problems,' Sunset Direct Lending CEO Bob Howard said. He added that Sunset was no longer making new loans."

"The long list of participants in the subprime mortgage crisis will not go unscathed in sharing the pain but should work together to find solutions to the problem, a U.S. banking regulatory official said on Wednesday."

"'I believe there is more than enough blame to go around,' Sara Kelsey, general counsel of the Federal Deposit Insurance Corporation, said."

"The pain starts with borrowers and then mortgage brokers and bankers to brokerage firms, parties involved in securitizing mortgages, domestic and foreign investors, and insurance companies, she said."

"The list also includes pension funds, mutual funds and hedge funds, as well as banks that provided money to each of the market participants, she added."

"She said data suggest 52 percent of subprime mortgages are originated by independent mortgage banking companies, 23 percent by banks and thrifts, 13 percent by mortgage banking subsidiaries of bank and thrifts and 12 percent by mortgage banking units of bank and thrift holding companies."

"The Federal Reserve encouraged this but also has hiked interest rates. 'I believe that the hard lesson we are all learning from the current situation will involve shared pain, all along the line,' Kelsey said."

"NAR Chief Economist David Lereah predicted that tighter underwriting practices may cause total home sales to fall by about 100,000 to 250,000 nationally, or no more than 3 percent a year over the next two years."

"Lereah warned against overreaction to the situation. 'Tougher lending standards imposed by the marketplace and the regulators are necessary, but we need to be mindful of overcorrection. Responsible lending practices are what the doctor ordered, not practices that cause a credit crunch,' Lereah said."

The Boston Herald. "Amid outrage on Beacon Hill over a tidal wave of home foreclosures, leaders of the Bay State’s embattled mortgage industry are quietly doing a little housecleaning. The Massachusetts Mortgage Bankers Association has ejected a trio of now controversy-tarred, and financially troubled, subprime lenders from its membership rolls."

"'It’s more the case we want to protect ourselves,' Charlie Nilsen, head of the Massachusetts Mortgage Bankers Association’s communications committee. 'When we talk to regulators, our integrity, our credibility is really important.'"

"Community activist Jenelle Dame has a secret weapon to hit back at the predatory lenders blamed for putting millions of Americans at risk of losing their homes: she calls in the sharks."

"'We go to their office and bring people and signs and little plastic sharks, like loan sharks. We put sharks all around their offices,' said Dame, an organizer in Cleveland, Ohio, which had the nation's highest foreclosure rate last year."

"Florida's tax receipts are falling for the first time since 1975 as a slump in construction and home sales dims the economy of the Sunshine State."

"States from New Jersey to California are getting pinched, just a year after many enacted the biggest spending increases in almost two decades. 'A lot of states are starting to worry,' said Iris Lav, who follows state budgets for a nonprofit. 'We have yet to see the effects of the bursting of the property bubble.'"

"Philadelphia Federal Reserve Bank President Charles Plosser on Friday cautioned against seeking quick policy solutions to pressing problems like rising defaults in subprime mortgage markets."

"Speaking at a Fed conference on community development, Plosser never referred directly to the issue of subprime lending defaults but left little doubt he was talking about calls for action to deal with the problems the sector faces."

"'While the symptoms of economic and financial hardship can be stark and dramatic at times, the causes are often subtle and complex,' Plosser said."

"'Bold headlines, graphic news stories are tempting to generalize and may evoke calls for immediate policy response,' he added. 'But public policy driven by headlines rarely turns out to be good public policy.'"

"'We must remember that markets are a powerful source of innovation. Our development efforts should not necessarily focus on thwarting or overriding market mechanisms, but rather they should focus on taking greater advantage of it,' Plosser said."