A housing report from the Arizona Republic. "One set of victims bought a house as an investment, only to realize that it belonged to someone else. Another had a lender knock on the door and immediately foreclose on the home, leaving the family on the street. They're just a few examples of how a Valley mortgage-fraud ring with ties to a former Goodyear real estate agent left seven families in the lurch."

"This notion of stealing someone's house and borrowing money against it, something this blatant is new to me,' said Ted Noyes, who prosecuted the case for the Arizona Attorney General's Office."

"'This mortgage-fraud case had a lot of impact on a lot of families,' said James Todak, a special agent for HUD. 'They were defrauded, and we investigated the suspects aggressively.'"

"With the cooling real estate market in the Valley, Todak expects that HUD will get slammed with more bank- and mortgage-fraud cases. Technically, a crime doesn't occur until a bank suffers a loss. In the hot housing market, people could turn around and sell their properties for a profit to pay off loans. But in the shadow of the prosperous market, that option isn't as readily available, and banks end up foreclosing."

"And that's when cases of fraud start bubbling to the surface. 'We expect losses to go through the roof,' Todak said of cases in the dwindling market."

"'The best thing a person can do is be proactive and monitor their holdings with the Recorder's Office,' he said. 'Oftentimes, these crimes prey upon people who are already in financial trouble. But when something sounds too good to be true, it usually is.'"

The Denver Post from Colorado. "To understand what's happening to the mortgage industry, take a look at Douglas County. One of the country's most prosperous communities now has a foreclosure rate approaching what its former public trustee calls a 'tipping point.'"

"In 2006, foreclosures as a percentage of population were higher than any other year since 1991, said Jack Arrowsmith, Douglas' former public trustee and its current clerk and recorder."

"At a recent foreclosure sale, Douglas officials offered 32 residential properties for auction. According to Arrowsmith, nobody bid on 31 of them. That's why mortgage companies making risky loans are now closing by the hundreds."

"So on Tuesday, when a Federal Reserve governor expressed shock at the quick national collapse of the risky lending market, she sounded vaguely like Capt. Reneau in 'Casablanca.'"

"The explanation for crazy lending has always been crazy. 'It is no longer community banks making mortgage loans,' Englewood lawyer Robert Hopp told a recent foreclosure seminar at the Colorado Bar Association. Out-of-town lenders provide mortgage money for a fee. Risky loans are quickly packaged with other mortgages and sold as securities for a fee. Investors buy the mortgage-backed securities expecting a fat return."

"Everybody gets paid. Risks get diluted in big loan portfolios. Those who can't afford houses suddenly can. It all sounds too good to be true because it is. Now, the only people capable of stopping the madness, the money grubbers, are getting a clue."

"Arrowsmith lived through the real estate bust of 1988, when home values actually declined. It was ugly. 'It's a positive thing that lenders are starting to review the process,' Arrowsmith said of the risky-loan meltdown. 'But it's going to take time. In the long term, lenders are going to require borrowers to put some money into their property.'"

"Sure, that thins the homebuying herd, but it forces folks back to the reality, and responsibility, of homeownership."

"The risky-lending boom of the early 21st century was a Ponzi scheme. It depended on constant growth in real estate values. For lenders, growth meant collateral would always be worth more than the money tied up in it."

"According to Hopp and Arrowsmith, some lenders made loans worth up to 20 percent more than the assessed value of homes. These lenders believed appreciation would make up for negative equity. When the market stagnated and borrowers couldn't keep up with mortgage payments, negative equity and zero-down lenders ended up with a bunch of houses worth less than the amount of money owed on them."

"When that happens, you get foreclosure auctions where only one house in 32 is worth a bid."