Some homebuilders and developers regrettably were involved in the massive mortgage fraud that helped trigger the present recession.
A Federal Financial Institutions Examination Council (FFIEC) White Paper (PDF) labels one common scheme the "Builder Bailout." and describes it as follows:
A builder bailout occurs when a builder, who has unsold units in a tract, subdivision, or condominium complex, employs various fraudulent schemes to sell the remaining properties. In stressed economic or financial conditions, a builder may be pressured to liquidate remaining inventory to cover financial obligations. To sell the remaining properties, the builder may use a variety of tools including, but not limited to, hidden down payment assistance or excessive seller concessions to elevate the sales price. As a result of the scheme, the unsuspecting financial institution is often left with a loan secured by inflated collateral value and the “real” loan-to-value is greater than 100 percent.
Here are some of the more prominent cases as reported by the Mortgage Fraud Blog: