The problem began years ago when banks were forced to give mortgages without confirming social security numbers or borrower identification. As a result, illegal immigrants were able to obtain home mortgages which they could not afford.
We've discussed this link here, and began doing so over a year ago here and here. We've asked for the federal government to investigate this link. Hopefully, this new announcement by HUD will force congress to stop burying its head in the sand and act.
UPDATE: The above link to the HUD announcement has been removed. You can view the Google cache version here.