Mortgage fraud is alive and well and living in America. While fraud is particularly widespread in South Florida and Southern California, it occurring everywhere.

"It's getting to be a big deal," James Johnson of Freddie Mac said, tongue in cheek, at the National Real Estate Lending Conference in Scottsdale earlier this month. The meeting was sponsored by America's Community Bankers.

According to the Federal Bureau of Investigation, bogus checks still account for the majority of the suspicious activity reports filed by federally-related financial institutions. But mortgages have moved up to the second position.

And it's a big business, too. While the typical bank robber might getaway with $3,000, James Hagan of Advanced Financial Technology in Edmond, Okla., a con man makes off with about ten times that much on a single loan.

Mortgage fraud "has not only become expensive," he said, "it's become expensive big time. And they don't even use a gun."

No, the weapon of choice among fraud specialists isn't a Smith and Wesson, it's technology. With today's technology, thieves can fabricate practically everything from pay stubs to complete tax returns, said Johnson, who is responsible for quality control at Freddie Mac, which purchasers mortgages from local lenders.

In one case, Hagan related, the con man stole the software used to generate bank statements. "They were absolutely perfect," he said. They phony statements "couldn't have been any better had the bank generated them itself." For the most part, though, the perpetrator isn't a professional thief -- or even the borrower -- it's one or more of the dozen or so specialists -- the loan officer, appraiser, real estate agent, title agent -- who touches the mortgage as it winds its way through the approval process.

Most cases -- 80 percent by one estimate -- involve insiders.

"Most consumers don't know how the process works, but mortgage professionals do," Johnson said. In most cases, though, the scam is based on identification theft and built on a single piece of data -- a social security number, according to Dick Ward, a former FBI agent who now heads the Affinity Corporation in West Hills, Calif. A counterfeit social security number is relatively easy and inexpensive to obtain, according to Ward, whose firm offers the services and technology lenders can use to verify information before funding their loans. Just $10 and away you go.

In checking loans, Affinity has found numerous occasions where the number has been used by multiple individuals.

The firm also has found invalid social security numbers, numbers that have been retired because they were issued to people who have died, numbers that were issued to someone else or reported stolen, numbers issued prior to the borrower's birth year and numbers that didn't match the borrower's age.

Affinity also sees a lot of cases in which the property being purchased is involved in multiple transactions at the same time, already has several mortgages on it that exceed its total value, or that has supposedly increased in value far more than others in the area.

And it uncovers situations where the telephone isn't registered to the stated borrower, or is registered to a cell phone or a business rather than the borrower.

ADFITECH also sees a high incidence of identification theft. "There are data banks of dead people's social security numbers alive and on the web," said Hagan.

It uncovers a lot of falsified employment records, especially concerning second jobs, and tons of phony gift letters stating the money given to the borrower is a present that needn't be paid back.

Hagan said gift letters are fudged so often that lenders should consider them guilty until proven innocent. "If you get a gift letter," he said, "a light should go of and then you should proceed from there." None of these indicators are proof in and of themselves that someone is up to no good, the panelists stressed. But they are red flags that should be investigated further.

Scam artists aren't caught very often, however. But when they are tripped up, it's usually because they tend to use the same information over and over again. "Often some commonality of factors shows up," said Hagen.

But even when they are nabbed," said Ward, "they usually change only a few things and start all over again."

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