The airplane collided with houses while on final approach at about 1022 Pacific time. The Certified Flight Instructor received serious injuries while the Private pilot undergoing instruction and one passenger sustained minor injuries. The airplane sustained substantial damage. Instrument conditions prevailed; no flight plan had been filed. The Private pilot was receiving multiengine instruction. On downwind, the CFI reduced power on one engine. As they turned left from base to final, the bank angle got steep. The airplane lost altitude, and collided with the roof of one house, bounced across another roof, and came to rest on top of a third house.