The Frontlines Of The Foreclosure Crisis

"Code enforcement officer! If you're inside, make yourself known now!"

Tom Curl and Jose Mendez work the frontlines of the foreclosure crisis, inspecting vacant and often vandalized homes taken back by the bank. Even in nice neighborhoods, appearances can be deceiving, CBS News correspondent Ben Tracy reports.

"Code enforcement!" the officers said. "Anybody in here?"

"Yes, I'm in here," someone said.

"Can you come on out now please?" the officers said.

"Yes sir," the voice said from inside.

The officers call him a squatter - someone who moved into a foreclosed home after a family was thrown out.

"Obviously he was staying here. And looks like he's been basically staying here for a long time now," Mendez said.

The house is ransacked; the walls covered in mold; plumbing no longer doing its job.

"They're living in filth," Mendez said of squatters. "I mean they're literally living in feces."

These are the ugly inside effects of the housing market meltdown, which has emptied out entire neighborhoods.

Pointing around one neighborhood, Mendez said: "That's been foreclosed and that's been foreclosed. You have one, two, three, four, five."

A recent survey by the National League of Cities found that in 33 percent of cities nationwide, vacant homes and blight are a growing problem.

"When you have small kids like mine, you really don't sleep at night because everything you hear - you're jumping up to see what it is," said Sacramento resident Elohim Cofield.

Local governments try to keep squatters and vandals out - but their rules are often broken.

Some of these squatters are even more brazen. they'll clean a place up, get the power hooked up, then they'll change the locks on the door and actually rent it out, collecting money on a place they don't even own.

Real estate fraud detective Mike Wood says scammers reel in unsuspecting tenants by posting on sites such as Craigslist.

"It's not till months later that the bank finally sends someone to check on the house and to discover that someone's actually living in there," Wood said.

That makes it hard to know who belongs and who doesn't.

"I don't know if you're aware but this property has been foreclosed," Mendez said to one woman.

That mother and her daughter were found living in what should be uninhabitable.

"Does your heater work?" Mendez asked her.

She said: "Actually, no."

"And you say you don't have power right?" Mendez said.

"No," she said.

The officers report these problems to the banks, who own the homes, but they rarely even respond.

"I give out my personal cell number - nothing ever rings," said officer Curl.

That leaves the officers to climb into yet another subprime mortgage mess.