This article from today’s Arizona Republic really speaks for itself: [Hat tip to our source!  You are always appreciated!]

Big lenders and Wall Street investors are going after Arizona mortgage brokers, appraisers, real estate agents, title firms and home buyers for fraud.

Dozens of civil lawsuits alleging the gamut of mortgage fraud, from cash-back deals to lying about income on loan documents, have been filed against Valley firms and individuals during the past few months.

Fraud experts and regulators say the lawsuits are only the beginning as the fallout from mortgage fraud starts to hit the Valley. Cash-back scams involve getting a mortgage for more than a home is worth and pocketing the extra money. The deals inflate home values and leave lenders with losses from loans worth far more than the house itself.

Here’s some of the lawsuits:

• Phoenix-based Biltmore Bank is suing Security Title of Arizona and a group of others over a cash-back deal. The suit alleges the group worked together to get Biltmore to fund a $1.3 million loan for a home valued at $800,000 and then pocketed the extra cash. Also named in the suit are Valley appraiser Kittelmann & Associates and Tucson resident Frank Padilla, who was indicted and pleaded guilty last year to fraud and money laundering as part of a $13 million property-flipping scheme.

"It was a creative and imaginative scheme these guys engaged in, but how anyone could figure the title firm was at fault as opposed to the lender or the appraiser picked by the lender doesn’t make sense," Security Title’s attorney Michael Rusing said.

• A Lehman Brothers investment trust in New York and Aurora Loan Services in Denver are suing the parent company of First National Bank of Arizona over 38 home loans. They say the bank misrepresented the values of properties, and the income, debt and employment of some of the borrowers. Lehman and Aurora bought the loans as investments and want the bank to buy them back.

• San Francisco-based Transnational Financial Network is suing Phoenix-based Lending House Financial and a Scottsdale investor who purchased 22 Valley homes within days of each other last spring. Transnational funded loans worth nearly $2 million on seven of the homes but says it wasn’t notified the investor was buying multiple properties and his real debt level wasn’t disclosed on mortgage documents.

The investor never made a payment on the houses, which were foreclosed on last year. Most of the homes sold at foreclosure auctions for tens of thousands of dollars less than the mortgages the investor took out on them. The suit was filed last year in San Francisco.

Jeff Matura, the attorney for Lending House Financial, said his client is regulated by Arizona’s Department of Financial Institutions and complies with its guidelines and met all of those rules when it handled the mortgages involved in the Transnational suit.

• Tucson-based mortgage lender First Magnus is suing its former Valley loan officer, Tyson Rondeau, for fraud and negligence. First Magnus claims bad loans are costing it nearly $1 million. Separately, the lender agreed last fall to pay a $200,000 fine after the Arizona Department of Financial Institutions found several violations, including a branch manager making false promises or concealing facts in 10 fraudulent loan transactions.

"Mortgage fraud, particularly cash-back deals, is a big problem," said Felecia Rotellini, superintendent of the Department of Financial Institutions, which regulates mortgage lenders, brokers and escrow firms. "Civil actions are a great source of information for us and often confirm something we are already looking into."

This should put increased downward pressure on prices, as lending standards tighten and spooked buyers worry that current market prices remain artificially inflated.  Those of us who live in Phoenix have front row seats for what is shaping up to be quite a fight.