Some housing bubble news from Wall Street and Washington. The Charlotte Observer, "More Charlotte-area homebuyers are suing Beazer Homes, alleging a litany of misdeeds and claiming the company 'fraudulently qualified' them for loans they couldn't afford. They misrepresented assets and debts on loan applications, the suit says, and concealed important information from buyers. They also concealed inflated sales prices of homes to cover fees and expenses, according to the suit."

"Buyers have suffered a decline in property values, as Beazer's practices led to rampant foreclosures in Oak Hill, the suit says. 'People are trapped in their homes because their values have dropped below what they owe,' says...legal partner Daniel Grist. 'All the foreclosures have flooded the neighborhood with cheap houses.'"

"At least 14 of 98 homes in Oak Hill have fallen into foreclosure, a 14 percent foreclosure rate, an Observer analysis shows. Oak Hill's foreclosure rate is not among Beazer's highest in Charlotte. The Observer found 10 Beazer subdivisions with rates of 20 percent or higher."

From Reuters. "Tax preparer H&R Block Inc. said the subprime mortgage unit it is selling has lost a credit line, lowering its borrowing capacity closer to the minimum needed for the sale to go through."

"In a late Tuesday filing with the U.S. Securities and Exchange Commission, H&R Block said Lehman Brothers Holdings Inc. did not renew a 'warehouse' facility with the subprime unit, Option One Mortgage Corp., after it expired June 28."

From Fortune. "While Bear Stearns is the most recent financial institution to find itself caught up in the subprime-mortgage quagmire, the three credit-rating agencies; Standard & Poor's, Moody's, and Fitch, may be the next ones to see their good names dragged through the mud."

"The reason? Ohio attorney general Marc Dann is building a case against them based on the role he believes their ratings played in the marketing of risky mortgage-related securities."

"'The ratings agencies cashed a check every time one of these subprime pools was created and an offering was made,' Dann told Fortune, referring to the way the bond issuers paid to get their asset-backed securities (ABSs) and collateralized debt obligations (CDOs) rated by the agencies."

"These ratings run from AAA for debt with the lowest risk of default all the way down to noninvestment- grade bonds, which many pension funds are prohibited from purchasing in their charters. '[The agencies] continued to rate these things AAA . [So they are] among the people who aided and abetted this continuing fraud,' adds Dann."

"Dann and a growing legion of critics contend that the agencies dropped the ball by issuing investment-grade ratings on securities backed by subprime mortgages they should have known were shaky. To his mind, the seemingly cozy relationship between ratings agencies and investment banks like Bear Stearns only heightens the appearance of impropriety."

"According to experts in structured finance valuations, the ratings agencies are the central drivers, particularly in the riskier areas of asset-backed securities markets. The pool of buyers would be much smaller without a rating because pension and mutual funds hold only investment-grade bonds, says Christopher Whalen, who sold asset-backed securities at Bear Stearns."

"'The rating drives everything,' adds Sylvain Raynes, a former Moody's analyst and currently a principal at a firm that examines these securities."

"Regardless of whether a lawsuit materializes, the ratings agencies already seem to be policing themselves. Of the pool of securities created from 2006 subprime mortgages, Moody's has downgraded 19 percent of the issues they've rated and put 30 percent on a watch list."

"As Whalen puts it, 'The Street dragged everyone into increasingly bizarre and illiquid instruments, and there was huge profitability there, but what it did was buy itself a lot of trouble.''

From Bloomberg. "Delinquencies and defaults on U.S. subprime mortgages will keep rising as problems in the housing market persist, said Robert Parker, vice chairman of Credit Suisse Asset Management."

"'It's naïve to assume the worst is past us in the U.S. subprime market,' Parker said at a bond market conference today. 'At least over the balance of this year, the subprime default rate will rise.'"

"In the U.K., lenders are providing mortgages to customers who don't need them and might not be able to afford them, practices that may lead to 'serious wider consequences,' the country's Financial Services Authority said in a report released on July 4."

"All the subprime-mortgage lenders examined failed to apply responsible lending standards, and five of 34 intermediaries are being investigated and may be punished, the regulator said."

"The number of Britons entering bankruptcy rose to a record in the first quarter as consumers buckled under higher borrowing costs. Individual insolvencies in England and Wales increased 24 percent from a year earlier to 30,075, the Department for Trade and Industry said. The number of insolvencies was the highest since records began in 1960."

"Private equity firms led by New York-based KKR and Blackstone Group LP need to borrow $300 billion this year to pay for acquisitions, according to Bear Stearns Cos. More than a dozen companies abandoned borrowing plans in the past two weeks as investors demanded higher yields."

"Investors are demanding a 288 basis-point premium to buy junk bonds rather than Treasuries, the most since December, according to Merrill Lynch & Co. global index data. Spreads widened 53 basis points in the past month, the fastest increase since General Motors Corp. lost its investment grade ratings in 2005. A basis point is 0.01 percentage point."

"'Private-equity firms will carry on refinancing until the economy slows and operating profits thin out,' said Edward Eyerman, head of leveraged finance at Fitch Ratings in London. 'By then it will be too late as current debt loads will look unsustainable. The bill comes one day, that's the problem.'"

The Financial Times. "Investors in the worse-hit of two stricken Bear Stearns hedge funds are offering to sell their holdings for as little as 11 cents on the dollar but still finding no buyers, according to unfilled trades on a secondary market for funds."

"The best bid for Bear Stearns High-Grade Structured Credit Strategies Enhanced Leveraged Fund, the more geared of the two, is just 5 cents on the dollar. 'There are buyers but they can't agree on price,' said Jared Herman, co-founder of Bahamas-based Hedgebay."

"The Enhanced Leverage Fund's net assets of $638m were more than 10 times geared in March, meaning a drop of just 10 per cent in the value of its holdings would wipe out investors. Market participants estimate the CDOs the Bear funds held would sell for at least 10 per cent less than the values calculated by lenders."

"'Where things transact is still many points below where dealers have been marking them,' said one manager of CDOs and hedge funds. 'That is the big ugly secret of this market.'"

From MarketWatch. "Of the top five industries, only the financial sector cut more jobs in the first half compared with the same period last year."

"'The financial sector is clearly affected by the significant housing slowdown and subsequent collapse in the subprime lending market,' said John Challenger, CEO of the employment firm, in statement."

"Cuts in the financial sector doubled in June to 9,800 compared with May and were up 131% in the first six months of the year to 64,825."

"The Mortgage Bankers Association said its mortgage applications index rose 0.1 percent to a seasonally adjusted 619.4 in the week ended June 29, nearing its lowest level since mid-February."

"The refinancing applications gauge dropped 2.6 percent to this year's low of 1,687.2 on a seasonally adjusted basis."

"Many economists doubt U.S. housing will emerge from its slump before next year, predicting further price cuts to lure buyers to the huge supply of unsold homes. 'We've got a huge amount of inventory to work through, particularly of existing homes,' said David Kelly, economic advisor at Putnam Investments in Boston." "

"Pending sales of existing homes sank to their lowest level in more than 5-1/2 years in May, the National Association of Realtors said last week. There are almost 5 million new and existing homes on the market, and 'that's got to be very depressing for a Realtor,' said Kelly."