Some housing bubble news from Wall Street and Washington. Reuters, "Accredited Home Lenders Holding Co., a struggling subprime mortgage lender, said on Monday it agreed to be acquired by private equity firm Lone Star for $400 million. Accredited Home cut 1,300 of its 4,200 jobs in the first quarter, when lending volume sank 47 percent from a year earlier and delinquencies tripled."

"'It's the end of the specialty mortgage player, for now,' analyst Matt Howlett said. 'You need a big balance sheet to compete, and diversified sources of funding. It's everything the pure subprime lenders don't have.'"

"The terms value Accredited Home at $15.10 per share, 72 percent below where it traded one year ago."

The News Tribune. "Noting an operating environment that is 'more challenging than it has been in recent years,' Federal Deposit Insurance Corp. Chairman Sheila Bair warned that regulators and bankers 'need to ensure that new global capital standards do not threaten the safety net.'"

"That net of capital on hand stretched during the first quarter as bank income fell. The FDIC said income fell because of 'the housing slump, unfavorable interest rate conditions, slower growth in the U.S. economy and higher levels of problem loans.'"

"'Higher expenses for credit losses at large banks and narrower net interest margins at smaller institutions posed the biggest challenges,' Bair said."

From Bloomberg. "In the options market where the savviest investors take apart conventional wisdom, the Federal Reserve is facing growing pressure to consider raising interest rates as soon as December."

"Options on Federal Fund futures at the Chicago Board of Trade indicate a 41 percent chance the central bank will lift its target rate for overnight loans between banks to 5.5 percent from the current 5.25 percent, according to data compiled by Bloomberg. A month ago, they showed no expectations for an increase."

"'The economy is in better shape than people give it credit for,' said Jamie Jackson, who oversees government debt trading at RiverSource Investments, which manages $100 billion of bonds. 'People exaggerated the pass-through effects of the housing weakness. If the Fed were to do something by year- end it would be a tightening.'"

"The chance of at least one cut in the overnight lending rate between banks has fallen to 29 percent from 83 percent since the start of May, options prices show."

"UBS AG, among the biggest bond bulls this year, changed its forecast on June 1 for the Fed to begin cutting rates in October from August."

"UBS, along with Merrill Lynch & Co., Goldman Sachs Group Inc., had been predicting a housing-led recession would result in at least three rate cuts this year."

"'The case is building more and more' for Fed rate increases, said Richard Schlanger, who manages $4 billion in fixed income. 'We are definitely seeing more and more people moving away from the Goldman and Merrill argument that the Fed is going to cut multiple times.'"

The Associated Press. "Only a low credit score stood between Alipio Estruch and a mortgage to buy a $449,000 house in Weston, Fla., a few miles west of Fort Lauderdale."

"Instead of spending several years repairing his credit rating, which he said was marred by two forgotten cell phone bills and identity theft, the 37-year-old real estate agent paid $1,800 to an Internet-based company to bump up his score almost overnight."

"The growing practice is sending shivers through the mortgage industry. Federal regulators are also reviewing the practice. And after being contacted by The Associated Press for this story, Fair Isaac Corp., the developer of the widely used FICO score, said it will change its credit scoring system beginning later this year in a way it contends will end this little-known but potentially high-impact mortgage loan loophole."

"Ginny Ferguson, a credit expert for the National Association of Mortgage Brokers, considers the practice mortgage fraud, and the trade organization is about to release a policy statement against it."

"'These companies are encouraging consumers to commit fraud. On a standard home loan, there's a clause that says the consumer is not omitting pertinent facts that could impact his or her ability to repay the loan,' Ferguson said."

From Forbes Magazine. "These days just about every mortgage is flipped by a lender to another one or sliced up into pools of securitized packages that are sold on Wall Street. The financial engineering helped oil the housing boom by making credit more available."

"But stalled housing prices and rising defaults have revealed a mess: In the rush to flip paper, lots of the new lenders or pools don't have the proper paperwork to show they even hold the mortgage."

"There is a case in Kansas with no documents to show a bank owns the loan it says it does. In another, ownership of a loan was recorded on a single date in the name of two different lenders."

"For the lenders, a possibly bigger threat on the horizon is that homeowners' lawyers will bust up the 'holder in due course' doctrine that makes it easier for subsequent owners of an IOU to collect. The rule is enshrined in many federal and state statutes, but a judge could nonetheless find a way to side with the homeowner, particularly if a loan is purchased after it goes into default."

"'It's clearly the direction to go,' says Ohio Attorney General Marc Dann. He recently announced he'll amend his suit against defunct lender New Century to possibly list as defendants the banks overseeing pools that bought its loans. 'These pools are more than innocent holders.'"

From Crains Detroit Business. "Subprime mortgage lending decimated many of Detroit's older neighborhoods 40 years ago as an ill-conceived federal response to the 1967 riot. Today, private lenders are promoting the same potentially damaging practice."

"Detroit was picked as the principal target. HUD directed tens of thousands of subprime loans into the city's changing neighborhoods to individuals who could not afford the cost of maintenance or resale, resulting in massive foreclosures, abandonments and wide- spread destruction of stable blocks of housing."

"Today, history is repeating itself. Detroit leads the nation in foreclosures, and subprime lending is seen as the principal cause. With property values down, many subprime borrowers cannot resell their homes without a loss. Nor can they pay the broker's fees, repair costs or closing expenses involved in a resale."

From MarketWatch. "Defaults in subprime mortgages have led some lenders to adopt stricter standards in approving loans, imposing more discipline on borrowers and the lending industry alike."

"But the biggest shift in mortgage trends has come from consumers themselves, who have been fleeing to the relative safety of fixed-rate loans over the last 15 months."

"ARMs made up a 41.9% share of all mortgage originations in January 2006 but have 'plummeted' since to an 18.4% share in March 2007."

"A survey recently released by TransUnion's TrueCredit.com also showed a year over-year decrease in the number of those with ARMs. According to the survey, 24% of American homeowners with a mortgage said they were concerned about the monthly cost of their loans; 13% are worried they'll end up owing more than what their home is currently worth. In addition, 11% are worried about a payment increase when their ARMs adjust."

"Citing statistics from a recent Federal Reserve survey of loan officers, Doug Duncan, chief economist for the Mortgage Bankers Association, said that 56% of loan officers were tightening their standards for subprime mortgages and 45% were tightening standards on nontraditional or Alt-A loans. Subprime loans are made to borrowers with weaker credit histories; Alt-A loans often are low- or no-documentation loans."

"'You can still get a no-down payment (mortgage),' he said, 'but you're going to have greater wealth...and more evidence of that (financial) strength than you had a year ago.'"

"The TrueCredit.com survey also spotted some borrower misconceptions about the true cost of a mortgage, finding that 62% of those surveyed think the average homeowner with a 30-year fixed-rate mortgage will make interest payments of no more than 100% of the loan's face value over the life of the loan."

"In reality, a homeowner with a 6.75% rate will pay closer to 150% more than the amount of the loan itself, said Lucy Duni, director of consumer education for TrueCredit.com, in a news release."

"'On a $200,000 mortgage, that would mean payments totaling $466,000,' she said."