Some housing bubble news from Wall Street and Washington. "The number of U.S. homeowners who face possible eviction because of late mortgage payments rose to an all- time high in the first quarter, led by subprime borrowers. 'Housing is in a recession, and we're seeing that reflected in prices,' said Doug Duncan, chief economist for the Mortgage Bankers Association. 'If you're in a position where you can refinance or sell, but house prices have fallen below your outstanding loan balance, you're in trouble.'"

"In the quarter, 2.58 percent of prime barrowers sent their mortgage payments at least 30 days late, according to the Mortgage Bankers report. The subprime share of late payments rose to 13.77 percent from 13.33 percent in the fourth quarter, according to the report. The percentage of total homes in foreclosure, the so-called inventory, also rose for both categories."

From MarketWatch. "Duncan points to two groups of states for the rise in foreclosure starts and the foreclosure inventory rate. When it comes to loans entering the process, increases in California, Florida, Nevada and Arizona are to blame, he said."

"'Information provided to the MBA from a variety of sources indicates that the foreclosures in Florida, Nevada, California and Arizona are heavily influenced by speculators who are walking away from properties now that home prices have started to fall in areas of those states and they face resets in the adjustable-rate mortgages they took out for these homes. In addition, speculators in Florida are also facing much higher insurance bills,' he said in a news release."

"In terms of the foreclosure inventory rate, the blame for the increase lies with Ohio, Michigan and Indiana. The three states account for 8.7% of the mortgage loans in the country yet make up 19.9% of the nation's loans in foreclosure and 15.0% of foreclosures started in the first quarter."

"'The level of foreclosures and foreclosure starts for those three states exceeded what occurred in Texas during the oil bust of the mid-1980s, and Ohio is the highest ever seen in the MBA survey for a large state,' he said."

The Chicago Tribune. "As late payments and new foreclosures on adjustable-rate home mortgages made to people with spotty credit spiked to all-time highs in the first three months of this year, the Federal Reserve on Thursday considered reforms to crack down on lending abuse."

"The Fed's discussion comes amid new signs that the housing market's downturn is worsening. The percentage of payments that were 30 or more days past due for subprime adjustable-rate home mortgages jumped to 15.75 percent in the January-to-March quarter, up from the prior quarter's delinquency rate of 14.44 percent and the highest on record."

"'This is a moment of great concern in our economy as to whether subprime is going to pull us all down,' Susan Wachter, a professor of real estate and finance at the University of Pennsylvania's Wharton School of Business said in an interview."

From Bloomberg. "Bear Stearns Cos., the second-biggest U.S. underwriter of mortgage bonds, said earnings fell 10 percent, the first quarterly decline in two years, as mounting home-loan defaults reduced trading revenue."

"'Not only did they cite the challenges in the subprime market, but they also perceived a spillover into Alt-A,' said Bill Fitzpatrick, who helps oversee more than $1 billion at Johnson Asset Management. 'If there's a crescendo effect there, that will be a major concern for Bear Stearns and some of its competitors.'"

From Reuters. "'We're certainly going to be impacted in a weaker mortgage market until the mortgage business turns back around. That's going to be a little bit challenging,' said Bear Stearns CFO Sam Molinaro."

"The firm tightened its underwriting standards during the most recent quarter, which reduced the amount of loans to borrowers with weaker credit, Molinaro said."

"Bear Stearns Cos. is liquidating holdings from one of its hedge funds after making money-losing bets on subprime mortgage bonds, said three people with knowledge of the decision."

"Investors 'may also call into question' the asset values of other hedge funds, depending on how much Bear Stearns gets in the auction, said Josh Rosner, managing director at investment-research firm Graham Fisher & Co."

"Combined delinquency and default rates on subprime home loans in bonds are at the highest since 1997, Friedman, Billings, Ramsey Group Inc. reported. A derivative index used to bet on defaults of pieces of mortgage-bond deals with the lowest investment-grade ratings and sold in the second half of 2006 reached a new low two days ago and has dropped about 38 percent since it was developed in January."

"Lehman Brothers Holdings said yesterday it would merge two residential mortgage units, cutting 400 jobs. The investment bank, one of the biggest underwriters and traders of mortgage debt on Wall Street, said BNC Mortgage will be combined with Aurora Loan Services into a single residential mortgage business."

"About 400 employees, or 24 percent, of BNC’s work force will be cut over the next two to three months."

The New York Times. "Turmoil in the subprime mortgage market took its toll on two Wall Street investment banks today, as second-quarter profit at Bear Stearns dropped 33 percent and Goldman Sachs squeezed out a modest 1 percent rise in profit."

"Both firms suffered from the implosion in the subprime mortgage market, as borrowers with poor credit histories defaulted on their loans in record numbers."

"Goldman Sachs Group Inc.CFO David Viniar predicted that the U.S. subprime mortgage market, which has suffered rising defaults and generated losses for lenders over the past year, will get worse before it gets better."

"'The subprime business continues to be weak. We have not seen the bottom in the market. There will be more pain felt by people as it works its way through system,' Viniar told reporters in a conference call on Thursday."

The Associated Press. "State Banking Commissioner Howard Pitkin on Wednesday refused to issue a license for a new home mortgage company formed by former executives of the defunct Mortgage Lenders Network."

"Pitkin, in a letter to an official at Middletown-based InHome Capital LLC, said he was declining the request for the first mortgage broker's license because Mortgage Lenders Network did not release money for loans it signed off on late last year."

The LA Times. "If you were confused by the disclosure forms your mortgage lender gave you, you're far from alone, according to the Federal Trade Commission, which says the industry can do a better job."

"A study released Wednesday by the agency found that the required disclosures were ineffective at explaining the costs and risks of home loans. The study found that when given the disclosures now used: Half the borrowers couldn't correctly identify the loan amount. Nine in 10 couldn't figure out the total upfront cost of the loan."

"Two-thirds did not recognize that they would have to pay a penalty if they paid off the mortgage within two years. And 95% didn't know how much that penalty would be. One in five couldn't correctly identify the annual percentage rate, the amount of cash due at closing or the monthly payment, or whether that payment included charges for property taxes and insurance."

"Some experts say better disclosure may not be enough. Initial disclosures sent to consumers are notoriously inaccurate and there's no penalty for that, said Jeff Lazerson, president of Mortgage Grader. It's not until lenders give final disclosures at closing do they make a concerted effort to provide all the necessary details. By then, he said, it's too late."

"'They can make disclosures more clear all they want, but if there is no penalty if you don't comply, what does it matter?' he asked. 'Until there is a penalty for being late or inaccurate, it's business as usual.'"

"Freddie Mac, the second-largest source of money for home loans, reported its third consecutive quarterly loss after a drop in the value of derivatives it uses to hedge interest rate risk."

"Losses from the investments and derivatives were $1 billion in the quarter ended March 31, compared with a $934 million gain in the same period last year, Freddie Mac said."

"Freddie Mac reported that its credit-related expenses more than tripled in the first quarter, to $193 million from $60 million a year earlier."

"The increase in expenses was largely the result of boosted provisions for credit losses as mortgages purchased last year moved more frequently from delinquency to foreclosure, the company said. It said it expects such charge-offs to increase in the future 'from today's very low levels.'"

"'Worsening expectations' for risk of mortgage defaults had an adverse effect on Freddie Mac's financial results in the first quarter, the company said."