Some housing bubble news from Wall Street and Washington. AP, "Standard Pacific Corp.'s first-quarter loss widened as the worsening housing sector forced hefty impairment charges, the homebuilder said Monday. The Irvine, Calif., company posted a loss of $216.4 million. The latest quarter included charges of $117.9 million to write down the value of unsold inventory and undeveloped land. The company also booked a tax asset valuation charge of $83.7 million."

"Homebuilding revenue plunged to $348.2 million from $651.1 million last year, as deliveries dropped sharply and the average selling price slid 12 percent."

The Wall Street Journal. "When hedge-fund chief Ron Beller's investments in U.S. mortgages turned against him, he got a rude awakening to Wall Street's unsentimental ways. In a matter of days, Peloton Partners LLP, once one of the world's best-performing hedge-fund operators, lost some $17 billion."

"At one point during the ordeal, Mr. Beller collapsed from exhaustion, according to people familiar with the matter."

"MBIA Inc. swung to a $2.41 billion loss during the first quarter as the bond insurer faced ongoing deterioration in the credit markets and recorded billions in write-downs. MBIA was forced to reduce the value of its insured derivatives holdings by $3.58 billion. Net premiums written tumbled to $97.3 million from $171.3 million last year."

"Initially, bond insurers only provided insurance to municipalities. But in recent years business was expanded to insure other debt, such as bonds backed by mortgages and consumer loans."

From Bloomberg. "HSBC Holdings Plc, Europe's biggest bank by market value, said it set aside a less-than-estimated $3.2 billion to cover bad loans in the U.S. The outlook for the rest of the year 'remains unusually difficult to foresee in the current environment,' the company said in a statement."

"Mortgage insurer PMI Group Inc. said Monday it swung to a first-quarter loss, due to hefty payouts on default claims and charges to write off its investment in bond insurer FGIC."

"The company affirmed its outlook for 2008 paid mortgage insurance claims of $825 million to $975 million."

"IndyMac Bancorp Inc. said Monday it swung to a loss in the first quarter as deteriorating credit markets forced the mortgage lender to lower the value of mortgage-backed securities, and warned it would not post a profitable quarter in 2008."

"The latest results included credit costs and losses of $249 million related to declining values of mortgage-backed securities. The company more than tripled its credit reserves to $2.7 billion from a year earlier."

"'With respect to profitability, we do not expect that Indymac will be able to return to overall profitability until the current decline in home prices decelerates,' CEO Michael Perry said in a statement."

The Miami Herald. "BankUnited Financial, parent company of BankUnited, lost $65.8 million for the first quarter. In response to a weaker economy, deteriorating residential housing markets and increased foreclosures, the Coral Gables-based company increased its provision for loan losses to $98 million for the quarter, up from $4 million for the quarter ended March 31, 2007."

"BankUnited's allowance for loan losses was increased to $202.3 million, or 1.61 percent of total loans, as of March 31. 'This has been a difficult and disappointing quarter,' Alfred R. Camner, BankUnited's CEO said in a press release."

The Daily Telegraph from Australia. "House prices in some parts of Sydney have almost halved as battling borrowers struggle to keep up with increasing interest rates. The falls - in Sydney's west, the Hills district, and Sutherland Shire - are far steeper than previously thought."

"In the past six months, 30 homes across Sydney have been sold for at least $100,000 less than was paid at the height of the property boom, many as a result of distressed mortgagee sales."

"One property in Bankstown, bought for $500,000 in August 2005 sold in February for $215,000 - a loss of $285,000."

The New Zealand Herald. "The median house sale price fell in April and the volume of sales collapsed 46 per cent from a year ago, the Real Estate Institute of New Zealand said today in its latest monthly report."

"'We thought that the March sales figure of 5,129 was low, due to a short month because of an early Easter, but April shows that the loss of confidence in the housing market is deeper than we had anticipated,' REINZ President Murray Cleland said in a report titled: 'Residential property sales slump further.'"

"Auckland city prices, which includes CBD apartments, fell to a median NZ$463,000 from NZ$510,000 the previous month, implying many apartments were sold at fire sale prices."

From Reuters. "When a regulatory hurdle hit the Japanese housing sector last year, Tokyo assumed any delays would be short-lived. But almost a year later, a growing backlog of unsold homes threatens to dent already feeble economic growth."

"'Developers are running their businesses on a hand-to-mouth basis,' said Hiroyuki Ito of Azel Corp., a developer. 'We cannot sit back on condominiums that are not selling.'"

"Last year, several condominiums...in Higashimurayama in western Tokyo...were sold ahead of completion. Now prices are being cut as the builders pack up. 'We had sold only half the 249 blocks that went on sale last year,' said Mikiko Yoshida of Nippon Steel City Produce, a developer. 'We have cut the prices by around 20 percent to boost sales.'"

The Telegraph. "There are 1.03 million properties up for sale in Britain – a 15 per cent increase on a year ago. There are 25 million homes in Britain. Richard Graves, an estate agent in Bridlington, East Yorkshire, said: 'There are very few buyers coming in through the door, and viewings are well down.'"

"'Properties are taking three to four months to sell, and there are a fair few that have been on the market for over a year. They were probably over-priced with and the sellers have missed the boat,' he said."

From Myvesta. "Record numbers of hard-pressed British householders are facing the nightmare scenario of losing their homes as the credit crunch bites harder. As property prices start to plummet and the mortgage market melts down, many borrowers are increasingly finding themselves in a vice grip of nose-diving negative equity and rising loan repayments."

"Between January and March in England and Wales, a staggering 27,530 families - or 300 every day - reached the brink of being homeless."

From Dominica Today. "Housing sales, mainly in blueprints, have fallen more than 50 percent in the last few weeks, said Dominican Housing Builders and Promotores Association (Acoprovi) president Jaime González, although realtors say it’s 'politics.'"

"'Right now nothing is being sold' he said, quoted by newspaper Diario Libre."

"'Nobody wants to risk investing in a sector that has so much insecurity.' He said housing prices have risen as much as 20 percent."

"'That has caused that the sector is restricted, which is left behind just a little bit in relation to came previously being developed because obvious when to a client it says to him that the house no longer costs a million pesos, but a million two hundred, obvious that the reaction is different. The client lies down for back, the business falls,' (he) affirms."

"Wally Perez, real estate agent for Remax, says this month’s sales are down. He’s only sold two, which he attributes to the electoral process."

The Calgary Herald. "Year-over-year growth in new housing prices across the country slowed for a second consecutive month in March, according to Statistics Canada."

"The federal agency's New Housing Price Index, released today, said 'this deceleration continues a downward trend that started in September 2006, due mainly to the softening market in Alberta.'"

"Regionally, for the 11th straight month, prices rose at the fastest pace in Saskatoon, with a year-over-year price increase of 46.2 per cent, down from the record-setting pace of 58.3 per cent in February."

"'Edmonton and Calgary continued to experience slow market conditions. Builders in both cities reported lowering their prices to generate interest and stimulate sales,' said Statistics Canada."

The Lantern. "Thankfully, there is now light at the end of the tunnel in the race for the Democratic presidential nomination. However, the oddest developments of the Clinton campaign occurred rather recently."

"Ever since the start of the election cycle last year, Clinton positioned herself as a responsible adult in contrast to Obama's apparent youthful idealism. But she effectively dropped that ...when she decided to propose totally idiotic policies in response to the housing crisis and rising gas prices."

"For the housing crisis, she wanted to initiate a 90-day foreclosure moratorium that would have exacerbated the problem exponentially."

The Daily News. "The House approved the homeowner rescue measure by a vote of 266-154. Dr. John Gnuschke, a professor of economics at the University of Memphis, isn't sure how significant the impact would be even if it were to pass the president's desk in this form or some other."

"'I believe that the housing crisis and the associated increases in foreclosures will not be solved by additional government action and that further market interference will only prolong market adjustments,' Gnuschke said. 'Markets are powerful and punitive, and while we don't always like the outcomes, government cannot continue to protect every company or individual that has suffered a loss.'"

The Washington Times. "It seemed like a win-win situation when the boom was raging. Many first-time buyers attained the American dream of homeownership while the 70 percent of Americans who already owned homes watched their household wealth soar along with house prices."

"Federal and state tax coffers were filled with revenue generated by booming home sales and prices, and political leaders reaped millions of dollars in campaign contributions from the profitable real estate and mortgage businesses and Wall Street firms, all of which benefited from keeping the party going."

"'Everybody was happy,' said Sheila Bair, the Federal Deposit Insurance Corp. chairman. No one in Washington wanted to break up the financing orgy and end the housing bonanza. 'So long as prices were going up, not many people were complaining.'"

"'Back then, we mainly looked at it as a consumer issue. I don't think anybody thought it had economic implications,' Mrs. Bair said. Few people at the time had 'a full appreciation of the costs of these mortgages, or [realized that] if the market stopped going up [borrowers] would lose their ability to pay.'"

"In addition, a community reinvestment law passed by Congress in the 1990s required banks to go to great lengths to make loans available to minorities."

"'The political pressure to create a housing 'happy meal' was enormous,' said George Cormeny, a former loan officer at Allfirst Bank who also worked as a legislative aide. The circular reasoning rationalizing the subprime lending boom became 'unreal' to any longtime observer in the lending world, he said."

"'A financial institution would be rewarded with a good score and heaps of praise for making increasing quantities of poor quality housing credit available to marginally credit worthy borrowers,' he said. 'The regulators had almost complete disregard for the consequences. ... The costs of this social experiment will be large and linger for a long time.'"

The Plain Dealer. "An investigator hired to examine issues surrounding the bankruptcy of New Century Financial Corp. said senior management ignored ample evidence of rising default and foreclosure rates while allowing the company to write riskier loans."

"The report said there was plenty of evidence that New Century's corporate officers were aware of rising default rates in 2004. About 7 percent of the loans originated by New Century in 2004 - or about $1.8 billion - defaulted after borrowers made three or fewer payments. That compares with $312 million in early-payment defaults in 2003."

"An internal review of the company's nine operating centers in 2004 graded the performance of seven centers as unsatisfactory and two as needing improvement."

"A senior New Century official afterward questioned whether the auditing teams needed to change their policies rather than have the operating centers 'clean up their act.'"

"A Plain Dealer analysis shows that nearly half of the subprime loans written in Cleveland in 2005 by five of the country's biggest subprime lenders resulted in a foreclosure filing."

"Cleveland resident Myra Clarke had just gotten divorced, had just lost her home at a sheriff's sale and had just gone through a bankruptcy to shed $38,000 in debt. But that didn't stop Long Beach Mortgage, a subsidiary of banking giant Washington Mutual, from lending her $505,000 to buy six Cleveland rental properties in 2005."

"Her bankruptcy file showed she was a nurse making less than $40,000 a year. Escrow documents included in the foreclosure lawsuits filed against her show she provided $96,000 to cover down payments and closing costs."

"Those foreclosures were filed on Clarke's six houses within eight months of her buying them, which indicates that she made few, if any, payments on her loans."

"Robert Ruckstuhl is a Newbury Township mortgage broker and appraiser who has become a consultant for attorneys in foreclosure cases. Ruckstuhl...guesses that at least 25 percent of subprime loans written in Cleveland between 2002 and 2006 contained an element of fraud that should have stopped the loan from being funded."

"There were about $1.75 billion in subprime loans written in Cleveland during that five-year period." "It's impossible, Ruckstuhl said, for lenders not to have known they were originating large numbers of fraudulent loans. 'It's a matter of what they wanted to acknowledge,' he said."

"Kathleen Engel, a professor at the Cleveland-Marshall College of Law at Cleveland State University, said...a prosecutor would need to prove that executives intentionally participated in the fraud. Part of the genius of subprime lending, Engel said, was how lenders and investment banks insulated themselves from potential liability."

"'The reason we saw such huge growth in independent brokers was because they wanted brokers to do the dirty work,' Engel said. 'They were able to put a shield between themselves and liability for wrongdoing.'"

"'This was actual fraud at the highest levels,' said Anthony Accetta, a former federal prosecutor. 'It wasn't an accident. It was not a failure of oversight. It was actual fraud, and we're not doing anything about it.'"

"In the 1970s, Accetta prosecuted what was then the largest mortgage fraud case in U.S. history. He said the subprime-lending business model worked like a Ponzi scheme. The scheme ground to a halt, Accetta said, when investment banks could no longer cover up the billions in losses that bad lending created. Too many people had stopped making their mortgage payments, which meant not enough money was coming in to pay investors."

"'This is a national catastrophe, and the perpetrators [on Wall Street] are not being prosecuted,' Accetta said. 'It's one of the easiest cases to prove because there are plenty of witnesses and plenty of evidence out there.'"

"Eric Forster, a Los Angeles-based consultant for mortgage fraud litigation, said the entire subprime mortgage industry was 'fraught with fraud.'"

"'What makes this crime wave unique is that, in most cases, the banks cooperated with the perpetrators,' Forster said. 'Once they discovered they could securitize loans and transfer the risk to some investors in China or Europe, there was no reason to underwrite the loans any longer.'"

"Despite the FBI and SEC investigations, Accetta said he doesn't think the U.S. Justice Department 'has the stomach' to prosecute these companies, out of fear it would undermine confidence in those financial institutions and our capital structure."

"'So you're left with prosecuting individuals,' Accetta said. 'This was systemic. It had nothing to do with this individual or that individual. There was no individual in any of the investment banks who could have stopped it even if they wanted to.'"