Some housing bubble news from Wall Street and Washington. Bloomberg, "Hovnanian Enterprises Inc., the worst performing U.S. homebuilder stock, reported a wider second- quarter loss than earlier forecast and said the subprime mortgage crisis is exacerbating weakness in the home sales market. 'The adverse publicity surrounding the subprime market has further damaged home buyers' psychology, resulting in decreased demand and leading to continued use of sales incentives,' Hovnanian said."

"Hovnanian said today it will have a pretax expense of as much as $20 million to cut the value of its property and walk away from deposits on parcels of land it doesn't plan to buy. The company delivered 30 percent fewer homes last quarter than a year ago and saw 'exceptionally high cancellations' in the Fort Myers-Cape Coral area of Florida."

"Net contracts for the quarter declined 21 percent to 3,116. Excluding Fort Myers-Cape Coral, the company's cancellation rate was 30 percent and net contracts dropped 17 percent."

The Associated Press. "'These contract results reflect a continued challenging operating environment in most of the company's markets,' Hovnanian said in a statement."

From Forbes. "The extent of Hovnanian’s woes is on par with many of its peers. Recently, Pulte Homes said first-quarter sales dropped 38%, to $1.8 billion, in the first quarter, reflecting a 37% decline in home closings. Another major home builder, D.R.Horton also warned investors last month that sales orders tumbled about 40% in the second quarter."

"'I think the loss will only get worse as time goes by, at least for another year or two,' JMP Securities analyst, Alex Barron, said. 'Most of the builders are operating on very thin margins right now, as soon as they drop the price a little bit, they start losing money.'"

The Orange County Register. "New Century Financial of Irvine, the largest subprime lender to file for bankruptcy protection, said it will lay off 2,000 of its remaining workers, including 500 in Orange County, effective today, after failing to find a buyer for its loan-making units."

"'This brings us to today, which is a day that I could never have imagined facing,' said CEO Brad Morrice. 'We must terminate most of our remaining workforce, including virtually all origination personnel.'"

"Kathleen Allen, a regional operations manager who is being let go after 11 years with the lender, said she held out hope that part of the company could be salvaged until yesterday's call. 'It's hard to understand how we were number two in the nation and now we are nothing,' Allen said."

"Analysts said New Century could not find a buyer for its assets because so many other companies are trying to unload their assets amid the industry meltdown. 'If you can get it off your hands without losing money, that's the best you can expect,' said analyst Bose George."

"He said subprime loan volume could drop by a third or a half this year. That doesn't bode well for laid off workers, he said. 'That has to come out of somewhere,' George said. 'Even if platforms are sold the buyers will have to do the trimming. It's kind of inevitable that this stuff happens for a little while.'"

"Embattled subprime lender New Century Financial Corp. said KPMG LLP resigned as the company's auditor, effective April 27, noting that KPMG didn't include any adverse opinion in its audit reports for the years ended Dec. 31, 2005 and 2004."

"On Feb. 7, New Century said it needed to restate results for the 2006 quarters ended March 31, June 30 and Sept. 30 to correct accounting errors for loan repurchase losses. New Century was advised by KPMG that the 2006 accounting issues could constitute a material weakness in the companys internal control over financial reporting."

"NewStar Financial, Inc. today reported...a $14.9 million pre-tax charge to recognize impairment in the company's residential mortgage-backed securities portfolio."

"The company also announced that it would discontinue its investment activity in this asset class and manage the disposition of its current portfolio over time to optimize its economic value."

"'A severe correction in the RMBS market offset an otherwise strong quarter for our core lending franchise,' said CEO Tim Conway."

The Chicago Tribune. "The downturn in the housing and mortgage industries is crimping the profits of another Chicago-area financial-services company. Old Republic, which characterized the results as 'a bit disappointing,' writes insurance policies that kick in when a borrower defaults on a first mortgage home loan. As more mortgage lenders reported loan defaults, Old Republic had higher claim costs in the quarter."

"'I hate to say it, but when we consider the continued negativity of housing statistics so far this year, it does not augur very well for the title business,' Al Zucaro, Old Republic CEO, said in a conference call last week. 'Revenue expectations for this year, for the second quarter at the least, are probably not going to be met in light of these trends.'"

"The industry, in fact, could be in for tough sledding well into 2008. 'It took a while for the housing and mortgage lending industries to reach a fever pitch,' Zucaro said, 'and it will take as long to wring the excesses out of this part of the economy and bring down the temperature.'"

"Employers in the US last month added the fewest jobs in more than two years as payroll losses spread beyond homebuilders and manufacturers. The unemployment rate rose."

"Ian McCarthy, CEO of Atlanta-based builder Beazer Homes USA Inc., said April 26 that the housing market remains 'extremely challenging,' and he doesn't see any signs of recovery."

From MarketWatch. "Mortgage brokers would be saddled with new rules designed to protect borrowers in the hard-hit subprime market under a bill introduced Thursday in the Senate."

"The proposal would force brokers and originators to assess a borrower's ability to repay a loan before taking one out, and prohibits 'steering' consumers to rates or terms they can't afford."

"Also Thursday, the Federal Reserve said it will hold a public hearing June 14 to consider adopting new rules to combat abusive lending, especially in the subprime market."

"'The goal is to find ways to promote sustainable homeownership through responsible lending, informed consumer choice, and effective guidance and regulation,' said Fed Gov. Randall S. Kroszner in a statement. The Fed has authority to issue regulations that cover all lenders, not just banks."

The LA Times. "The notion of a taxpayer bailout would be highly controversial, and many politicians are wary of having government come to the rescue of borrowers who took out voluntary loans. Community activists, however, maintain that many borrowers were deceived about the costs they were incurring."

"'To be clear, no one is getting bailed out,' said a statement by John Taylor, president of the National Community Reinvestment Coalition. 'Borrowers will repay their loans, but at interest rates and with fees that are fair and reasonable.'"

"As state lawmakers rush to reform lending practices that have contributed to a recent surge of mortgage defaults and foreclosures, consumer advocates say these efforts fall short of what is truly needed: a federal law protecting home buyers."

"Any new laws from Congress are far from certain, however. Senate Banking Committee Chairman Christopher Dodd says increased regulatory oversight and voluntary actions by lenders are preferable to a government bailout."

"Kurt Pfotenhauer, senior vice president for government affairs at the Mortgage Bankers Association, called Dodd's approach 'responsible, thoughtful and forceful.' A taxpayer-financed bailout plan doesn't make sense, he said, because 'the mortgage finance industry is already stepping up to help those borrowers.'"

"Steven Wieting, senior economist with Citigroup, said tighter lending standards should result in lower levels of home sales in the coming years. He does not believe the mortgage market's troubles will hamper the economy in the short term."

"As defaults rise, credit agencies Standard & Poor's and Moody's have in recent weeks downgraded or placed under review bonds backed by risky mortgages, particularly second mortgages that borrowers have used to finance 100 percent of a home's value."

"Economist Christopher Thornberg said the credit rating agencies should have been far more skeptical. 'These things should have been rated as risky a long time ago,' he said."