The Sacramento Bee reports from California. "Sacramento home builders have tried practically everything to move product in a slow market: lower prices, auctions, luxurious upgrades and so on. Now they're offering cheap money. Working in tandem with lenders, two home builders are offering mortgage financing for new homes at below-market rates. 'The builders are clearing brush,' said John Schleimer of Roseville-based consultant Market Perspectives. 'The big push certainly right now is to get rid of standing inventory.'"

"John Arvanitis, a Citrus Heights mortgage broker, said interest-rate buydowns are preferable to continued price reductions, which drive down market values for everyone in the community. 'You don't want to perpetuate (or) assist in a market crash,' said Arvanitis."

"Elk Grove, already mired in an economic slump, may be at the forefront of what's coming to the entire Sacramento region. Already home foreclosures there are up fivefold. Unemployment has climbed. Laguna Ridge – a big new master-planned development – is largely a ghost town of unsold homes and vacant lots."

"And with the region's unemployment rate rising, homeowners aren't the only people struggling. 'We're doing our best to stay open,' said Chris Correa, co-owner of a long-standing brewpub. 'There used to be a housing boom, a lot of new people, a lot of new money moving in here. Now people's houses are losing equity. People are incurring debt and they're just not coming out to restaurants.'"

"The flood of Bay Area refugees to Elk Grove drove housing prices skyward and generated a mad rush to build homes, schools and shopping centers. The downturn calls into question just how strong the boom really was. They were wealthy on paper but chronically short of cash."

"Preparing to expand, the Sacramento Natural Foods Co-op looked at demographic studies of Elk Grove and saw nothing but high incomes. But when the Co-op opened in the Elk Grove Marketplace on Bond Road, it found many residents weren't so rich after all."

"'A lot of these 70,000 new residents down there were young families with mortgages up to their eyeballs,' said general manager Paul Cultrera. 'The disposable income wasn't there. … It's tied up in mortgages and new furniture.'"

"The slowdown is most obvious in the Laguna Ridge development, also known as Madeira. It was going to be Elk Grove's hottest new community, with 8,000 homes by 2009. The downturn has made a joke of that timetable."

"Much of the 1,900-acre site is a vast plain of unbuilt lots. Only 229 houses have been sold since the development opened 18 months ago, according to the Gregory Group."

"Anna Starr, owner of the Yarn Shoppe on Laguna Boulevard, has watched three of the 11 tenants disappear from her shopping center over the past year. 'Three vacancies in our little tiny shopping center – that hurts a little bit,' Starr said."

"Starr, who took out a second mortgage to buy inventory, is afraid of being overextended. 'You've got your house tied to it, your livelihood,' she said. 'I'm curious to see how the summer's going to play out for us if the economy continues to slump. I think my summer's going to be hard.'"

The Record Searchlight. "Homes sales in Shasta County in 2007 reached a 10-year low while the median price fell 4.3 percent from 2006. DataQuick reported the 2,108 homes that sold in Shasta County last year were the fewest since 1997, when 2,078 escrows closed."

"'When you look at 1997 as the point ... there were a lot fewer houses on the market then, so it's really much more meaningful ... it's noteworthy,' Redding real estate agent Glen Jones said of 2007's numbers."

"Doug Eaton of Guild Mortgage in Redding said he's had his busiest week in about a year. But his clients are refinancing out of adjustable-rate mortgages. The buyers haven't come out."

"'I think they are waiting for prices to drop further,' Eaton said."

The San Francisco Chronicle. "Across the country, task forces of prosecutors, FBI agents, securities investigators, class-action lawyers and others are mobilizing to figure out who broke the law during the high-flying days when lenders were handing out mortgage money like drunken sailors."

"California, with its spiraling property values and history of loosey-goosey lending, is one of 10 'hot spots' nationwide where mortgage fraud proliferates, the FBI said."

"One Oakland woman, who asked not to be identified, explained how she exaggerated her income - with encouragement from her mortgage broker - when she refinanced her home."

"'He didn't say anything illegal out loud,' she said. 'He didn't say 'lie,' he just made a strong suggestion. He said, 'If you made $60,000, we could get you into the lowest interest level of this loan; did you make that much?' I said, 'Um, yes, about that much.'"

"He went clickety clack on his computer and said, 'Are you sure you don't remember any more income, like alimony or consultancies, because if you made $80,000, we could get you into a better loan with a lower interest rate and no prepayment penalty.' It was such a big differential that I felt like I had to lie, I'm lying already so what the heck. I said, 'Come to think of it, you're right, I did have another job that I forgot about.'"

"One Bay Area man who worked as an account executive at several subprime lenders said he witnessed mortgage brokers who blatantly falsified information on loan applications."

"'I had a broker open a drawer full of blank W-2s and pay stubs while he told me he could get me whatever I needed' in terms of 'proving' borrower's income, the man said."

The North County Times. "Several banks issued statements this week saying they were temporarily suspending withdrawals from open home equity lines out of concern that borrowers could owe more than the house is worth...even on people who are current on their mortgage payments."

"'It's an emotional hardship,' said Patti Lien of Menifee. 'We kept our credit good. We've done everything right, and this is what we get because Countrywide made all these crappy loans.'"

"Countrywide Financial announced Thursday that it has cut off 122,000 borrowers from pulling any more equity out of their homes. Wells Fargo, Washington Mutual and JPMorgan Chase released statements Friday saying they have also started halting equity lines because of tumbling home values."

"'It really wreaked havoc for me,' said Dan Holbrook, a Fallbrook homeowner. At the end of the year, Holbrook paid off his equity line with a $50,000 payment. Four days later, Bank of America froze his equity line, he said."

"'I'm scrambling right now,' he said. 'It has created a tremendous amount of stress because that was money to live on for me.'"

"Holbrook, a real estate consultant, said most people view such loans as emergency-only money. That is how he viewed it until the housing market slowed, he said. 'A lot of people figured these equity lines were safety nets,' he said. 'The problem is many of us are on a high-wire act right now. And you think the net is there, and you fall and it's not.'"

"The banks' reactions follow a 17-month drop in San Diego County home values, according to a Standard and Poor's report. Riverside County has also seen falling home values, with some areas losing almost half their value, said Phillip A. Bellante, owner of a San Diego mortgage broker."

"'I can show you areas in Murrieta and Riverside that have gone down 40 percent,' he said. 'And is it going to go down more? Yeah, it is.'"

"In the midst of a severe countywide housing downturn, Carlsbad stands out as a city where many homes have retained their value and have actually appreciated."

"But even with strong median prices, the coastal city has seen some sales at a loss of 15 percent or more in value over the last three years. 'You're getting some very localized markets within Carlsbad that are getting nailed and some others are doing fine,' said Norm Miller, a real estate professor with the University of San Diego Burnham-Moores Center for Real Estate."

"The median price for 92011 was $872,000 in 2007, practically identical to the 2006 median price. But of 71 homes sold in that ZIP code in 2007 that had previously sold in 2004 or later, 30 have lost value, according to data from the county's MLS."

"One buyer who is convinced of Carlsbad's relative strength in the housing market is Sonjia Kurzepa, who plans to retire there when she moves from her current home in Denver. She recently purchased her soon-to-be primary residence in Aviara."

"But she said she knows San Diego County is working through a housing depression and that some homes in the beach community will continue to lose its value, but not hers."

"Kurzepa, a long-time real estate investor, owns homes in Nevada and Florida, two states that have joined California in leading the nation in home-price declines. She said none of her homes has lost value."

The Union Tribune. "Seven affordably priced homes being built on Wisconsin Avenue are almost finished, but few qualified buyers have applied to buy one. Even though interest in the affordable homes is high, few people have submitted the necessary paperwork."

"Eighteen applications are in and less than half are expected to qualify for the two-and three-bedroom townhomes, said Claire Carpenter, CEO of the community development corporation."

"'It's a great opportunity for good people to find good-quality homes in a market that almost precludes this kind of opportunity,' Carpenter said."

"The townhomes are 1,150 square feet and 1,310 square feet. Each has 2-½ bathrooms and a one-vehicle carport. The purchase price is expected to be $389,000 to $419,000. Buyers must meet income restrictions set by the federal government."

"David Cooksy, the city's director of housing and redevelopment, said it's a tough time to sell homes even if the price is subsidized. The slowdown in the housing market and economic uncertainty led to a drop in the expected sale price, which last year was $450,000."

"The city was planning to choose buyers by lottery in March, but there may not be a lottery if more people don't apply and qualify."

The Orange County Register. "About 5,000 people, many of them looking for real estate bargains, filled a hall at the Anaheim Convention Center on Saturday for an auction of foreclosed homes."

"Julie Finaldi of Corona and her husband picked up a two-bedroom, 900-square-foot house in Riverside with a winning bid of $150,000. Under the auction rules, a 5 percent 'buyer's premium' was added to the bid, resulting in a sale price of $157,500."

"Finaldi, a Realtor, figures the house needs about $20,000 to $30,000 worth of renovations, much of which her husband can do. They intend to rent the house out for $1,200 or $1,300 a month."

"'I'm so excited,' she said. 'We've been trying to get one for a while.'"

"Mark Vachani was bidding on a house in Irvine's Northpark neighborhood. The three-bedroom home was recently listed by a broker at $959,900. Bidding opened Saturday at $449,000."

"The auctioneer launched into a rapid-fire solicitation. Bids escalated quickly. Men in tuxedos raced through the crowd, screaming or waving brightly colored batons when they spotted a bidder."

"As the price rose above $700,000, Vachani dropped out. The winning bid was $860,000."

"Winning bidders were escorted to a curtained-off area to arrange financing with mortgage lenders and sign escrow paperwork. More than a few of them either backed out or failed to qualify for financing, so the homes went back for rebidding."

"The Northpark house was auctioned again within about 20 minutes. This time it went for $820,000. The second winning bidder also failed to close the deal, so the house came up a third time."

"'I'll go to 700, maybe 750 – that's it,' Vachani said. He went to $775,000. The winning bid was $810,000."

"While bids came fast at the front of the hall, the back rows were filled with folks who were mostly just watching. Frank Gasparovic of Cypress was hoping for a house in Orange County or Corona for about $200,000."

"'I'm not really serious,' said the school district maintenance worker."