The East Valley Tribune reports from Arizona. "The subprime mortgage market’s dramatic free fall is reverberating throughout the Valley as lenders tighten standards and would-be buyers watch in dismay as deals collapse without warning. Gilbert real estate agent Tra Bell recently felt the ripple effect when his office had five deals unexpectedly fall apart."

"'The lenders are saying, 'We can’t do it anymore in this type of a market,' he said. 'It’s not going to work. We’re losing our shirts.'"

"The stricter standards come as a rising number of subprime borrowers fall into foreclosure. The default rates on these loans are higher than Wall Street investors, who buy them from lenders, are willing to tolerate, said Chris Mozilo, president of the Arizona Mortgage Lenders Association."

"Investors are forcing mortgage companies to buy back hundreds of millions of dollars-worth of loans. Lenders are also selling at deep discounts and taking huge losses, Mozilo said. 'Some of them are on the verge of bankruptcy,' he said."

"The fallout has left thousands of loan officers jobless and knocked many aspiring first-time home buyers out of the market. Now, lenders are taking away options and that 'makes a tough market even tougher,' he said."

"And it’s not just subprime borrowers who are feeling the crunch. If a first-time buyer loses his loan, then the seller can’t move-up to another house, said Yalda Alawi, an agent in Chandler."

"It filters all the way up, said Alawi, who had two deals involving subprime loans fall through last week alone. Industry observers worry that the overall housing market could suffer with inventories increasing and prospective buyers being shut out."

"Some 2,949 sales were recorded last month, down 24.5 percent from the same period in 2006, the latest Phoenix Housing Market Letter from analyst RL Brown shows."

"Developers also took out fewer building permits for new homes with 3,630 last month, compared with 3,737 in February 2006. Builders are also finding success with efforts to rid themselves of speculative homes by offering incentives and slashing prices."

From Inside Tucson in Arizona. "Mortgage fraud in Arizona has jumped according to the Mortgage Asset Research Institute’s annual survey, which showed the state went from 23rd to No. 7."

"The biggest increases in fraud between 2005 and 2006 came from cash-back deals in which loans are taken out for more than what property was worth and keeping the difference."

The Review Journal from Nevada. "Home Builders Research on Wednesday reported 1,411 new home sales in February, less than half the number sold in the same month a year ago. It was the same story for existing homes. There were 2,332 recorded resales during the month, down 27.2 percent from a year ago."

"'The Las Vegas housing market is still slugging it out for cautious consumers who are looking for steals and deals,' housing analyst Dennis Smith said."

"Las Vegas-based SalesTraq reported dips in both new and existing home closings. New-home sales fell 49.5 percent to 1,441 and existing home sales fell 17.2 percent to 2,594. Despite the sales slump, median new home prices rose 3 percent in February to $321,555 and resale median prices increased 1.4 percent to $284,000."

"'This defies both the laws of gravity and economics,' SalesTraq President Larry Murphy said."

"Builders pulled 1,005 new home permits in February, down 60.6 percent from a year ago, and that follows a 53.9 percent drop in January, SalesTraq reported. Mid-rise and high-rise closings were lower in February than January, as were condominium conversion sales, Murphy said."

"Prices haven't dropped because sellers haven't adjusted to the marketplace yet, said Gena Lofton, CEO of a Los Angeles-based real estate consulting company."

"'I believe they will go down,' she said. 'You've got so many subprime loans that are going to be resetting. If those owners aren't able to refinance, prices will begin to weaken. It just takes time to work through the system. The market has been overvalued for quite some time.'"

"Traffic through model homes has been stable since February, but net sales have declined 37.6 percent for the first two months of the year, Smith said. The cancellation rate has declined to 24 percent from 26 percent a year ago."

"SalesTraq showed 21,220 homes on the MLS in February, nearly a 50 percent increase from a year ago and a supply of 12.2 months at current sales levels."

The Las Vegas Business Press. "While Southern Nevada loan officers believe the local housing market will improve in the coming months, no one is sure what's going to happen to the sub-prime lending industry."

"'For us, B paper (subprime loans) are more than 50 percent,' said Jose Sanchez, a loan officer with American Nationwide Mortgage."

"Bill Ochs (is the) owner of Las Vegas-based Nevada Mortgage, which has been in operation for nearly 30 years. 'These companies that are in trouble will probably become absorbed by larger entities but there will be changes down the road,' said Ochs, who believes greed and escalating real estate values have contributed to the problem."

"'As houses went up in value, there were a lot of deals made with no money down,' he continued. 'There were speculators who said, 'I'm going to occupy the house' -- wink, wink -- and the plan was to flip the house, and make a profit and move on. It's fine until the market flattens and the investor can't make the payment.'"

"Those who are hurt are the honest subprime customers. 'Money is tight right now,' Sanchez said. 'I have a couple who have saved 5 percent to buy a $200,000 house and their FICO (credit) score is 600. I don't know if they're going to qualify. They want to hear assurances and all we can tell them is, 'We are going to try.' Do you know how long it took this family to save 10 grand?'"