Some housing bubble news from Wall Street and Washington. "Luxury home builder Toll Brothers Inc. said on Wednesday it expected to report lower quarterly revenue and warned that its profit would fall short of its own forecasts, as the protracted downturn in the U.S. home market worsened. 'Twenty months into this housing downturn, we continue to face difficult conditions in most of our markets,' CEO Robert Toll said in a statement."

"'We no longer expect to achieve the most recent quarterly and annual guidance we provided on Feb. 22,' he said."

From Reuters. "Toll Brothers' home-building revenue fell 19 percent for the period ended April 30. Second-quarter net signed contracts were off 25 percent. The second-quarter cancellation rate was 19 percent, higher than a rate of 9 percent in 2006, Horsham, Pa.-based Toll said. The second-quarter-end backlog of homes fell 32 percent."

"The company expects write downs pre-tax to be between $90 million and $130 million in the quarter."

From Bloomberg. "Toll said that while fewer than 2 percent of its buyers use subprime loans, stricter lending standards following the collapse of several mortgage companies are making houses at all price levels less affordable."

"'This, in turn, can impact the entire housing food chain, including some of our potential customers' ability to sell their existing homes,' Toll said in the statement. 'This, coupled with a lack of buyer confidence, may have served to impede the glimmers of a rebound we had started to see in early February.'"

From MarketWatch. "About 70% of cancellations in the latest quarter were from contracts signed more than nine months ago. 'This means that buyers are typically cancelling closer to closing, likely due to price or inability to sell their existing home, instead of financing issues that typically occur earlier in the process,' wrote Banc of America Securities analyst Daniel Oppenheim."

The Star Telegram. "Crescent Real Estate Equities Co. reported a first-quarter loss Tuesday and said it will sell the 21-story Ritz-Carlton Hotel and luxury condominium project under construction next to its flagship Crescent Court development in Dallas."

"Denny Alberts, president and chief operating officer, said the 217-room Ritz-Carlton and the 70-unit condo project no longer fit Crescent's portfolio."

The Wall Street Journal. "In the latest fallout from the housing market's decline, disputes are breaking out between builders and buyers who signed contracts for new homes and condos when the market was hot, and now want to get out of them."

"In Alexandria, Va., real-estate attorney Beau Brincefield said he has settled roughly 50 contract disputes and has another '50 or more' in the pipeline."

"Mr. Brincefield said the terms of that settlement are confidential. In general, he said, builders have agreed to lower purchase prices by as much as 35% or refund 25% to 100% of a would-be buyer's deposit."

From Forbes. "The National Association of Realtors said that sales this year will be lower than it earlier forecast. Carl Reichardt, a senior equity research analyst at Wachovia Securities, told Forbes.com that he wasn't surprised by the lower projections."

"'We have seen deterioration in business conditions for the homebuilders that we survey in March and April,' Reichardt said."

"Reichardt surveys 150 sales managers for homebuilders in 18 markets every month. 'Traffic was OK for the first three months, but then deteriorated in April,' he said. 'Sales were also OK, but also then deteriorated in March and April as well.'"

"And it could still get worse, Reichardt said. 'The homebuilding business has lost a portion of its customer base as financing conditions continue to compress,' he said. 'The housing industry has relatively modest job growth supporting it. If that leg is lost, housing could get worse.'"

The Philadelphia Inquirer. "This year's subprime-mortgage turmoil has forced a Philadelphia specialty-finance company to record an unrealized loss of $65.6 million on its $3.6 billion portfolio of mortgage-backed securities."

"The loss, reported for the quarter ended March 31, reflects a decline in the market value of the mortgage-backed securities, not defaults on specific mortgages."

"Countrywide Financial Corp., the largest U.S. mortgage lender, said on Wednesday it made 11 percent more home loans in April than a year earlier, but slashed lending to people with weaker credit histories."

"Nonprime loans, including 'subprime' loans, sank 49 percent to $1.68 billion, just 4 percent of total volume, and fell 29 percent from March's $2.36 billion."

"Like many lenders Countrywide has tightened its loan guidelines, and in March it stopped making some no-down-payment subprime loans. Just 7 percent of loans were nonprime from January to March, and Countrywide expects that rate to fall as low as 4 percent this quarter."

"Countrywide funded $2.7 billion in pay-option loans during the month as compared to $6.7 billion in the year-ago period."

"Mortgage investors could turn their backs on the market if they are forced to pay for flawed loans written by other lenders, several financial services industry representatives told U.S. lawmakers Tuesday."

"A mortgage investor 'needs to know that he won't bear responsibility based on conduct by parties outside of his control,' Howard Mulligan, an attorney who specializes in the mechanics of selling home mortgages to investors, told a Congressional panel."

"Regarding assignee liability, which would make mortgage investors share the risks of defaults on fraudulent home loans, Wells Fargo home mortgage lending chief Cara Heiden said: 'I am of the opinion that we shouldn't go there.'"

"Many lawmakers have cited as a model a New Jersey law that allows mortgage fraud victims to sue for damages but protects investors who take steps to make sure the loan is proper."

"Donald Lampe, another attorney who works on mortgage investments, told Tuesday's panel that an assignee liability statute that was too strong could spook investors with the fear of homeowner lawsuits and 'impair the secondary mortgage market.'"

"Standard & Poor's joined Moody's Investors Service in requiring more protection for investors in bonds backed by second mortgages, as late payments and defaults exceed expectations on such debt to borrowers with poor credit."

"Subprime versions of 'piggyback' loans have performed worse than subprime housing- debt overall, putting some AAA rated securities sold by Goldman Sachs Group Inc. at risk of downgrades from Moody's and leading HSBC Holdings Plc to set aside more reserves for losses."

"'People are taking out these loans and then realize they can't make payments on them,' said Terry G. Osterweil, an analyst at S&P. 'The first one they're going to default on is the second lien, not the first lien, because many times a servicer will write off the second lien and not foreclose.'"

"In November, ratings services broke from their past practices on mortgage bonds to reassess their initial ratings before a passes. Since then, securities of second mortgages have had the most ratings downgrades or warnings about downgrades among bonds from 2006, including on the only AAA bonds."

"'The bonds have come out of the gates performing extremely poorly,' said Jeremy A. Shor, a portfolio manager at Brown Brothers Harriman & Co., who oversees about $3 billion in asset-backed bonds. 'The market is trying to determine if this is due to idiosyncratic or systemic reasons.'"

"The poor performance of subprime piggybacks stems from 'a combination of the home-price-appreciation effect hitting at the same time as the origination standards led risk-layering to be at its highest,' which created more stretched borrowers and less ability for them to tap equity in a refinancing or sell, said Nicolas S. Weill, a senior vice president at Moody's."

"Defaults by real-estate speculators, or 'flippers,' probably also is rising, Weill said."

"Bank of America Corp. CEO Ken Lewis said a so-called credit bubble is about to break after six years of historically low interest rates and relaxed lending criteria."

"'We are close to a time when we'll look back and say we did some stupid things,' Lewis said. 'We need a little more sanity in a period in which everyone feels invincible and thinks this is different.'"

"Lewis isn't the only U.S. bank executive who expects that credit conditions will change. Wells Fargo & Co. CEO Richard Kovacevich said in December that 'I am not a forecaster of the future; I'm a historian. And history says this will blow up. It always has. And there will be some blood on the street.'"