Feigning occupancy to land a mortgage is the most common type of mortgage fraud encountered by a leading fraud insurance company that also trains lenders in loss mitigation.

More than half -- about 53 percent -- of claims filed with the Novato, CA-based Prieston Group during the first half of 2005 contained some level of occupancy misrepresentation.

Occupancy fraud occurs when a borrower -- or someone acting on the borrower's behalf -- misrepresents whether they plan to live at the property. That could be a second home buyer trying to obtain a lower owner-occupancy mortgage rate, an investor trying to avoid higher investment financing costs or a scam artist trying to pull a fast one.

But fraud is fraud. It doesn't matter who is committing it or why, severe penalties can apply.

Knowingly making false or misleading statements on a mortgage application is a federal crime and a form of personal financial suicide.

If you are convicted of a federal crime you could do hard time.

Back on the outside, your credit history will contain a financially devastating black mark for years after you are set free. You may never be able to borrow money from regulated lenders again and instead be relegated to the knee-cap busting interest rates of financing companies, pay-day and check-cashing loan stores, pawn shops and, perhaps, loan-sharking criminals just like you've become.

It's not a pretty picture.

As soon as a lender discovers a fake statement, it can call the loan balance due, seize the property and seek charges that could rain you with fines and punitive damages.

Prieston also found high rates of schemes involving hidden debt (31.6 percent of all claims); employment fraud (30.3 percent) and straw borrowers (12.9 percent). A "straw borrower" is someone who agrees to or is duped into acting as a borrower to conceal the identity of the actual borrower, the loan's recipient who actually gets the proceeds.

Multiple types of mortgage fraud were frequently found in Prieston's claims.

"Although occupancy fraud was the most commonly reported type of fraud during the first half of this year, we often find that claims contain multiple types of fraud and involve multiple people," said Prieston Group chairman Arthur Prieston.

Other types of fraud discovered in claims included false verification of rent (11.6 percent); appraisal fraud (9.7 percent); closing fund fraud (3.2); broker fraud and investment schemes (both 1.3 percent); false Social Security numbers and false mortgage verification (both 0.6 percent); and identity theft (0.6 percent).

"Recognizing all the fraud in a particular file is essential in identifying fraud schemes," said Prieston.

Occupancy fraud also was the No. 1 type of fraud reported in four of the top five mortgage fraud states. In Georgia, which led the list in number of claims filed during the first half of the year, occupancy fraud was found in 48 percent of the files.

By state, the number of claims filed where highest in Georgia (16 percent), followed by Texas (10 percent); Florida (9 percent); Illinois (8 percent); Michigan (7 percent); Tennessee (6 percent); California (5 percent); North Carolina (5 percent); Ohio (5 percent); and Utah (4 percent).