Some housing bubble news from Wall Street and Washington. CNN Money, "The National Association of Realtors said Wednesday it expects its measure of home prices to fall this year for the first time since the group began tracking sales nearly 40 years ago. In its latest monthly forecast, the group said it expects a 0.7 percent decline in the median price of an existing home sold this year. A month ago it had been projecting a 1.2 percent increase."

"The Realtors noted the problems in the subprime mortgage market had led it to cut its sales forecast."

"Tighter lending criteria and fallout from the subprime loan debacle will lead to a healthier housing market with greater assurance that owners can handle mortgage adjustments, but higher loan standards will slow the housing recovery, according to the latest forecast by the National Association of Realtors."

"David Lereah, NAR's chief economist, said the changes are necessary for the long-term health of the housing market. 'We want to people to be able to stay in their homes with mortgage terms they understand and can handle,' he said. 'Simply stated, a loan with the lowest monthly payment probably isn't in your best interests, borrowers need to understand worst-case scenarios. If you're in a mortgage you aren't comfortable with, now is an excellent time to refinance, if you can, with historically low rates on safer conventional loans.'"

From MarketWatch. "The chief executive of KB Home, one of the nation's largest home builders, said Tuesday he expects the housing slump to worsen, even though sales have improved in some areas of the U.S."

"'I think we're still early in the cycle here,' Jeffrey Mezger said. 'I think it's going to be tougher for a little while before it gets better, but there will come a day when it gets better, because the underlying demographics in job growth are there.'"

"Last year, 13% of the homes sold by KB Home were purchased with subprime loans, he said, adding that the homes represented an even lower percentage of overall revenue."

"'We don't know how it's going to play out,' Mezger said. 'You hear the doom-and-gloomers saying there will be 2 million foreclosures and the buyers going away. We don't think it will be anywhere near like that, but in the short-run, it will have an effect on things.'"

"He said his company is doing well in states such as North Carolina and South Carolina, but the market in Texas is softening. 'Each marketplace will get back into balance at its own pace,' he said."

From MSNBC. "In an interview with MSNBC.com, inspector general for the Department of Housing and Urban Development Kenneth Donohue reviewed the scope of his office’s work, the root causes of the jump in fraud and abusive lending practices, and his concerns about proposed changes at the FHA in response to the turmoil in the subprime mortgage market."

"Q: What has happened to the mortgage lending process that created these problems?"

"A: 'What I found, like I found in the savings and loan industry, is there are those out there that are going to do what they possibly can to bring in the business."

"The (mortgage) industry was trying to create additional homeownership. And that’s very nice, and I think that’s a great thing to allow people homeownership. But at what cost? ... I think what happened is that people — unscrupulous people — took advantage of that, and what they did was go out and solicit prospective buyers."

From Bloomberg. "National City Corp., Capital One Financial Corp. and SunTrust Banks Inc. may report lower first- quarter profits as the worst housing slump in more than a decade reduces income from mortgages."

"'We could see other similar earnings shortfalls,' said Mark Batty, an analyst at Philadelphia-based PNC Wealth Management, which oversees $50 billion and owns shares of Wells Fargo & Co. and Wachovia Corp. Wells and SunTrust reduced mortgages requiring little money down or proof of income, he said. 'We'll see whether they moved fast enough.'"

"'Nobody wants these loans right now,' said Steven Picarillo, an analyst at Dominion Bond Rating Service in New York. 'Why take a 30 percent haircut on these loans just because they have the word 'subprime' on them?'"

The Associated Press. "Alt-A lenders have taken hits in the market in recent days. Guy Cecala, publisher of Inside Mortgage Finance Publications, said a 'backlash' from the subprime market meltdown is part of the equation."

"'While you’re starting to see some deterioration of the quality, it’s not so much that investors should be dumping (mortgage-backed securities),' he said. 'But nobody wants to own a security that goes down in value, whether because of public perception or the reality of the market.'"

"Glenn Costello, a managing director with the Fitch Ratings agency, said that some of the Alt-A lenders were trying to distinguish themselves from others. 'But the fact remains that for some of the riskier products they originate, there’s a lack of demand for them'as investors get pickier about the market, he said. 'Investors just aren’t willing to pay what they used to.'"

From Morningstar. "When a bank sells a mortgage it attaches a temporary money-back guarantee. Basically, a bank guarantees that borrowers will pay on time for the first 90 days after the loan is sold. If they don't, the bank will repurchase the loan. When it repurchases the loan, the bank will have to write it down to fair market value and take a loss."

"We are already seeing this occur in the market. Fulton Financial recently announced that it would need to repurchase 8.9% of the $247 million in Alt-A loans it sold into the secondary market. Fulton recorded a $5.5 million loss on the repurchase. Based on this information, the fair market value of these loans is just 75% of their original value."

The New York Post. "The collapse of subprime mortgage giant New Century Financial, which created more than $220 billion in shaky home loans, is growing into one of the biggest bankruptcy tangles ever to hit Wall Street as shocking new claims of insider windfalls and hijacked millions emerge."

"At least 95 lawyers have fought all week in the Delaware bankruptcy court to alter New Century's own breakup blueprint, which has triggered several red flags."

"When Buck Meyer thinks about the $300,000 he lost after he bought a subprime mortgage lender's bonds, he doesn't hesitate to denounce financial titans Bear Stearns Cos., Credit Suisse Group, JPMorgan Chase & Co. and Morgan Stanley."

"Like the thousands of people who snapped up American Business Financial Services Inc.'s notes yielding 10 times the going rate on Treasury bills, Meyer had no idea that the company was on the verge of bankruptcy."

"'At what point did it become a Wall Street Ponzi scheme?' said Meyer, who almost wiped out the nest egg he received from selling his home in Doylestown, Pennsylvania, six years ago."

"Whether Wall Street's best and brightest were reckless in their pursuit of profits and somehow responsible for the consequences will be decided in a Philadelphia court. That's where the four top brands of finance are accused of creating an 'illusion' that American Business was a safe investment, according to a lawsuit filed on behalf of Meyer and more than 20,000 other individuals who held about $600 million of the company's bonds when it went bankrupt in 2005."

"Anyone searching for someone to blame has an obvious target in the New York-based securities industry, which, according to estimates by Bear Stearns, earned $540 million last year turning subprime home loans into bonds."

"'There is the potential for a lot more of these cases to be filed as the subprime lenders continue to fail,' said Charles Tatelbaum, a Florida lawyer who has represented creditors in some of the U.S.'s largest bankruptcy cases. 'I'd expect to see companies like Bear Stearns and JPMorgan running for cover by negotiating quick settlements.'"

"Retiree Joseph Funk lost $70,000 in American Business notes. He says he became too confident and too greedy as the high-yielding notes continued to pay. Funk says the Wall Street firms were greedy too, yet didn't pay a price for it."

"'These people are supposed to be the great financial minds of the world so they must have had some inkling that this was coming,' said Funk. 'They got their money out before the little people.'"