Some housing bubble news from Wall Street and Washington. "As the market corrects itself Standard Pacific's investors are scared, sending shares of the homebuilder down to levels unseen since the last bubble."

The Orange County Register. "'We're hearing they're about to violate bank covenants,' said Joseph Saluzzi, co-head of equity trading at Themis Trading LLC."

"'Standard Pacific stock is down because of talk of liquidity concerns,' said analyst Frederic Ruffy. 'We had a similar rumor on Beazer Homes last week. There is a general fear that the problems are spreading beyond the subprime lenders.'"

The Miami Herald. "WCI Communities said 17 percent of its condominium buyers have walked away rather than close on new units this year, the latest indication of trouble in the condo market."

"WCI also said the company is not in default of any credit agreements. Still, the builder said it's renegotiating terms with lenders to 'provide broader latitude to operate during the protracted downturn.'"

"'Buildings yet to close from now through the middle of 2009 will see progressively higher walkaways because they were contracted later in the boom cycle when prices were at the highest point,' said Deerfield Beach real estate analyst Jack McCabe, who has long argued that too many condos were built."

The Associated Press. "HomeBanc Corp., a mortgage lender and servicer in the Southeast, said Tuesday it is exiting the mortgage origination business."

"HomeBanc has been unable to tap its lines of credit in order to fund new originations, which has led it to cease its lending business. The company said it had to stop funding all mortgages Monday because of the loss of liquidity."

From MarketWatch. "Shares of Luminent Mortgage Capital Inc. slumped on Tuesday after the home loan investment company warned that it's been hit by lots of margin calls as the secondary mortgage market 'seized up.'"

"Luminent said last week it was not really subject to this risk. It does not issue loans, but rather purchases loans backed by good credit. The company confirmed it still planned to pay its dividend and had enough cash to keep operating."

"A week later, Luminent issued a news release some analysts said spells the company's demise. Luminent's markets 'have deteriorated significantly and in an unprecedented fashion.' Its lenders want their money back."

"Joseph R. Tomkinson, CEO of Impac Mortgage Holdings, Inc. announces the following response to current market conditions: In light of the continued and widely publicized volatility in the secondary and securitization markets, we have suspended funding on loans previously referred to as Alt-A loans.'"

"Mr. Tomkinson commented, 'We would like to remind our stockholders that these rapid changes are widespread in our industry and while we are continuing to assess the market daily and can not make any assurances.'"

The Houston Chronicle. "One of the nation's largest mortgage lenders, Houston-based Aegis Mortgage Corp., stopped taking new loans Monday, amid a day of news that signaled tougher days ahead for lenders and homebuyers."

"'It's a bloodbath out there,' said Mark Cady, senior vice president of Market Street Mortgage in Houston."

The International News. "A senior Bank of China executive on Monday said the US mortgage crisis would cause it to lose several million dollars from mortgage-backed investments, but the fallout would be minimal."

"Zhu Min, vice president China’s largest foreign exchange bank, said that the bank had invested several billion US dollars in mortgage-backed securities and losses would amount to several million dollars."

"Asia as a region had until June 2006, invested $226 billion in US mortgage-backed equities. Worth trillions of dollars, US mortgage sector has been buffeted by a national housing slump."

From Dow Jones. "Borrowers in California, Nevada, Hawaii and Florida face the harshest drought if banks cut off the flow of some popular but riskier mortgages. A broker at mortgage brokerage firm ACE Mortgage Funding LLC estimated Friday that 90% of mortgages that don't conform to standards set by Fannie Mae and Freddie Mac have disappeared in the last three days."

"As one visual sign of banks' cooling to a variety of mortgages they had introduced over the years, the broker's morning loan rate sheet dropped to one page, versus 10 pages usually. The broker asked not to be identified."

"California led the nation in originations of payment-option ARMs, with about 24% of all its refinanced and first mortgages falling into this category last year, according to data firm First American LoanPerformance."

"These home loans, also termed negative amortization loans because they tack any deferred interest on to the back of the loan, represented about 17% of Nevada's total mortgages last year, followed by just under 15% for Hawaii and about 13% for Florida."

"'You've seen growth in the states with high home-price appreciation,' said LoanPerformance spokesman Bob Visini."

From Bloomberg. "Fannie Mae, the largest source of money for U.S. home loans, asked its regulator for permission to take on more mortgage assets and help ease a crunch in the credit markets, a person with knowledge of the request said."

"Fannie Mae officials approached the Office of Federal Housing Enterprise Oversight in the past few days, seeking to have restrictions lifted so it can hold more home-loan assets in its portfolio, said the person, who declined to be named because the discussions were confidential."

"'At our conforming limit, the $417,000 mortgage will buy you a very nice piece of property in most of the country,' Freddie Mac CEO Richard Syron said in an interview. 'In Boston, New York, San Francisco, it won't. So I think that is something that has to be taken into consideration.'"

"Participants in financial markets shouldn't get their hopes up that the Federal Reserve will intervene to alleviate the current market turmoil, a former Fed governor says."

"''I think it is too early right now to think about any kind of intervention by the Fed,' said Susan Phillips, now the dean of the George Washington University business school in Washington."

"Phillips said that the financial markets' volatility is a painful but healthy 'reality check' and that this has led to an overdue repricing of risk. 'We're in the middle of that process,' Phillips said. 'The Fed wants the market to find its own right place,' she said."

The New York Times. "The end of cheap credit may be overdue. In the last few years, Wall Street has taken advantage of cheap money to make loans and finance takeovers that may not have made economic sense, said Robert DiClemente, chief United States economist for Citi — formerly called Citigroup."

"'At the core this is a healthy adjustment,' Mr. DiClemente said."

"Ed Yardeni, the president of Yardeni Research, said he had little doubt what choice Mr. Greenspan would make if he were still in charge."

"'Under Greenspan, my guess would be that the Fed would be already talking about priming the markets for a possible easing,' Mr. Yardeni said — through lowering of interest rates. But Mr. Greenspan is not in charge anymore. Mr. Bernanke is, and he appears to be more inclined to allow the credit crunch to play out on its own, Mr. Yardeni said."

"'The definition of a crisis in the Greenspan era was any market environment preventing a trader from getting 100 percent of his bonus potential,' said."

"Bernanke is trying to wean the market from that form of life support. It's a slow process, and during times of stress, old habits reassert themselves."

"At times like these, it's important to remember that 'Greenspan is no longer Fed chairman,' Bianco said. 'It's a dirty little secret that not too many people know.'"

From Reuters. "The U.S. housing downturn may be the first true test of Ben Bernanke's leadership at the Federal Reserve, but many on Wall Street say the dilemma has its roots in the legacy of his predecessor, Alan Greenspan."

"During his 18 years at the central bank, Greenspan unleashed the greatest credit boom in recent memory, bringing interest rates to their lowest levels in a generation. The result was an unprecedented lending bonanza."

"'Years and years of easy monetary policy under Greenspan created a tremendous amount of excess liquidity, which caused a total mispricing of risk,' said Frank Hsu, director of global fixed-income at Fimat. 'Now we're getting payback.'"

"Indeed, rising default rates in the U.S. subprime mortgage industry, which targets borrowers with sketchy credit, have begun to jeopardize asset prices worldwide."

"Analysts trace this debacle back to Greenspan, who not only cheered on the Internet boom but also battled its bust with yet another dollop of cheap credit."

"'He got carried away, caught in the 'new economy' hoopla,' said Alan Ruskin, chief international strategist at RBS Greenwich. 'That's ultimately proved quite problematic.'"

"Throughout all of this, central bank officials have remained sanguine, insisting the housing downturn was contained and would not have a broader impact."

"Many believe officials will have to acknowledge the seriousness of the situation in this week's policy statement, although they must carefully balance any such remarks with positive comments on the economy, if only to prevent the markets from whirling into a tailspin."

"But even this trap of perennial optimism can be traced to Greenspan's legacy. By embracing ephemeral fads like the 'new economy' and 'innovations in home lending,' the former Chairman made it harder for Fed officials to face reality without unsettling markets."

"'The U.S. housing slump was totally predictable, but the Fed remained in denial about it for a very long time,' said Bernard Connolly, global strategist at Banque AIG in London. 'A lot of the problems we see today stem from Greenspan's term in office.'"