Well I'm sure some loan fraud will be found but it is not all illegals. To characterize this as an illegal problem is wrong. It was fueled by Greenspan's injection of liquidity and cheap money. The bankers passed it on. Sure some are shady but in the end this is a broad based issue.
A local real estate freind said 50% of the homes he has shown in the last month are empty. People have bought up and can't sell because lending practices have tightened. The potential buyers can't move up because they used their home as an ATM or are trapped in a ARM and can't get a new load, . . . . because the lending practices have tightened. Also, the radio ads are now 'Make money on foreclosures!"
Oh, there is plenty of money to be made on foreclosures. Of course, you have to have cash to play that game.