Home Equity, Equity, Equity, Equity…The Wild West environment in real estate lending provided a perfect opportunity for some fast-moving fraudsters. In the time it took for banks to do the necessary title search on a property—roughly two weeks—scammers sometimes hit up other banks for more money. Cheaters took out as many as 12 loans from 10 different banks in a week, serially tapping into the same piece of equity. In the first nine months of 2007, real estate data provider First American CoreLogic found some $150 million in fraudulent home equity loans among the 1.4 million loan applications it analyzed. "A borrower would turn $200,000 into $2 million," says Steven E. Schroeder, co-founder of First American. The researcher's study gave banks the information they needed to step in and halt suspect loans.A Ballyrock CDO Goes from AAA to JunkFidelity Investments has its own set of subprime woes. In 2002 the Boston firm started a subsidiary called Ballyrock Investment Advisors to create and manage collateralized debt obligations sold to institutional clients. The group, which is separate from Fidelity's mutual fund business, avoided risky mortgages with its first four deals, sticking mainly with corporate loans. But last July, Ballyrock created a $517 million CDO backed by subprime debt. With individuals defaulting on the underlying home loans en masse, credit-rating agency Standard & Poor's (MHP) slashed the grade on some securities issued by the Ballyrock CDO from AAA to junk on Feb. 21. Moody's (MCO) is also reviewing the CDO for downgrades. It's not Fidelity's only bad subprime bet: Its Ultra-Short Bond (FUSFX) Fund lost 11% in the past year, vs. a 0.3% gain for similar portfolios. Says spokeswoman Anne Crowley: "Most of the higher-rated securities—which comprised the majority of the subprime holdings in our taxable bond funds—are likely to repay full principal."