Some housing bubble reports from Wall Street and Washington. The Atlanta Journal Constitution, "The environment clearly is getting a lot harsher for home building. Housing sales nationally have been dropping, while inventories of unsold houses have been climbing. As the housing slide accelerated, Beazer Homes laid off about 1,000 employees, roughly one-quarter of employees, and trimmed other expenses, too."

"Beazer pulled out of two markets in Indiana, Fort Wayne and Lafayette, and abandoned suburban Memphis. Now, the number of borrowers who cannot make their mortgage payments is climbing. For builders, that is bad in two ways: With regulators more engaged and lending standards tightening, the profitability of originating loans is threatened."

"A federal grand jury in North Carolina is looking into Beazer's mortgage lending and other financial practices. A group of Charlotte homeowners alleges in a lawsuit that the company's mortgage division used unfair practices."

"Few analysts say Beazer is out of the woods, even if the company has engaged in no wrongdoing. No large builder is immune from the overall market malaise, and that syndrome could persist for a year, said analyst Gregory E. Gieber."

"Builders like Beazer...probably made their situations worse by continuing to build houses even as sales were sagging, he said. 'Builders are naturally optimistic. That is what makes them businessmen instead of analysts and reporters.'"

"Beazer too was slow to react, he said. 'I thought that the company did not recognize the seriousness of the correction that was coming,' he said."

From Bloomberg. "The collapse of the subprime mortgage market may push some big U.S. homebuilders toward Chapter 11 beginning next year, according to bankruptcy advisers and lawyers who specialize in the real estate industry."

"The weakest publicly held builders are staying out of bankruptcy by relying on the profits they made when sales boomed and on the public debt they sold in those years, said Ronald Greenspan, a lawyer and financial adviser to the creditors of four bankrupt subprime mortgage lenders."

"Homebuilders issued $3.6 billion in public debt in 2005 and 2006, though only $600 million of that comes due this year, Greenspan said."

"'There is no sword over the industry's head yet,' said Greenspan. 'That doesn't mean the industry is not wounded. Instead, the breaking point could come in 2008 or 2009.'"

"The perceived risk of owning the bonds of some of the biggest U.S. homebuilders has increased since a wave of bankruptcies hit the mortgage industry that caters to homebuyers with poor credit histories."

"Credit default swaps have more than doubled in price since Feb. 1 for the second-biggest builder by revenue, D.R. Horton, Inc.; the fourth biggest, Pulte Homes Inc.; and the biggest luxury home builder, Toll Brothers Inc."

"The cost of swaps on $10 million worth of Toll Brothers debt, for example, jumped to $136,750 Friday from $58,500 on Feb. 1, according to according to CMA Datavision."

"Kara Homes Inc., the New Jersey builder known for so-called McMansions, became one of the first major, closely held home builders to file for Chapter 11 protection in October. Such regional builders are likely to precede any of the big public companies into bankruptcy, Kara's bankruptcy lawyer, David L. Bruck, said."

"By next year, or the year after, some of the larger companies will be forced to restructure as the housing crunch continues, he said. 'It's only a matter of time,' Bruck said."

The Star Ledger. "Just a few months ago, the big homebuilders were expressing cautious optimism. Fast forward to this spring, to what should be the prime selling season, and it's hard to find an optimist. Inventories of unsold homes are high; profits are down. The 'subprime' lending crisis is reverberating throughout the industry."

"'The housing sector is in the midst of a meaningful, multiyear downturn,' Fitch Ratings said. Moody's was even more alarmist in downgrading Hovnanian's debt, saying the company was bleeding cash."

"Hovnanian is grappling with a cancellation rate of about 35 percent. Larry Sorsby, Hovnanian's CFOr, said the company's staff has been reduced by about 20 percent during the last few quarters."

"One thing home builders have no control over is how news about the housing market impacts the psychology of prospective buyers. 'Anywhere in the country you can't open the paper without some negative comment being made about subprime,' Sorsby said. 'I think it's a fair comment to say we're less optimistic about the bottom being right upon us, primarily because of the subprime issues,' Sorsby said."

The Associated Press. "Wachovia Corp said it remains on track to meet its goals from its $24.2 billion acquisition of Golden West, which it acquired in October, though Chief Executive Ken Thompson said 'it's a trying time to be a participant in the mortgage market.'"

"Thompson said: 'Like everyone else, we're experiencing slowing mortgage originations, and customers are showing a preference for less profitable products.'"

"With Golden West, Wachovia added more than $122 billion in mortgages during the quarter, almost all with adjustable rates."

From Reuters. "General Electric Co.'s WMC Mortgage subprime lending unit has sharply cut back on lending activity, an executive said on Friday."

"'We curtailed production dramatically during the first quarter,' said Mark Begor, CEO of GE Money, Americas. 'We've tightened up a lot on our guidelines and really curtailed a lot of the business activities.'"

"He said that the Burbank, California-based WMC unit made just $3.4 billion in new loans during the first quarter, down from $9 billion in the fourth quarter."

"Fremont General Corp., barred by U.S. regulators from offering mortgages to borrowers with poor credit, said it agreed to sell $2.9 billion of subprime home loans to an unidentified buyer."

"The company is selling the mortgages, the majority of its remaining subprime loans, at a discount and expects to record a $100 million pretax loss as a result."

From Fitch Ratings. "While rising mortgage defaults are to be expected during a housing market downturn, the sharp rise in U.S. subprime mortgage defaults is notable."

"Fitch found that the severe response of the 2006 subprime vintage to the cooling housing market is attributable to high borrower leverage and the widespread use of stated income loan programs."

"After studying the collateral attributes of early payment default (EPD) loans and comparing them to loans that did not default in the first 12 months after issuance, Fitch found that Fair Isaac Corp. (FICO) scores have become less significant as an early default indicator when other high risk loan attributes, such as piggyback second liens or loans with no-income verification, are present."

"'While FICO scores continue to be highly predictive measures of relative credit risk for loans with similar characteristics, FICO scores play a lesser role when additional risk layers are added,' said Glenn Costello, Managing Director, RMBS, Fitch Ratings."

"'In the case of the 2006 vintage delinquencies, additional risk layers that are factoring into the sharply higher delinquencies include high combined loan to value ratios (CLTVs) and stated income loan programs as borrowers with higher FICO scores tend to be highly levered,' Costello said."

"In addition, loans made for home purchases have become a much larger percentage of subprime originations as opposed to refinances, which historically made up a majority of subprime pools. 'The added risk from the higher leverage and stated income feature is driving up default rates for purchase loans,' said Suzanne Mistretta, Senior Director, Credit Policy, Fitch Ratings."

National Mortgage News. "A large mortgage brokerage operation in the Pacific Northwest has been tardy paying some of its branches we're told. At press time, one branch manager said he had not been paid in 18 days. Typically, he gets paid in 48 hours, he told us."

"In case you missed it: First Horizon of Texas has exited the subprime wholesale niche. An executive there told us the company may re-enter the niche at some point but currently profit margins are much too thin."

"International investors bought a net $58.1 billion in long-term U.S. securities in February, down significantly from January as demand for mortgage-backed securities fell to a three-year low, a U.S. Treasury Department report showed."

"U.S. agency bonds, principally backed by home mortgages, saw their lowest net purchases by foreigners in nearly three years in February, as news of troubles in the subprime mortgage sector increased."

"Purchases of U.S. agency bonds, such as those issued by home loan funding company Fannie Mae, fell to $2.02 billion in February, their lowest level since net sales of $624 million in March 2004."

"'It probably is related to general concerns about what's going on in the mortgage-backed arena,' said Alan Ruskin, chief international strategist at RBS Greenwich Capital."