Apparently, even in hard times, mortgage fraud remains an easy con.

The number of Suspicious Activity Reports (SARs) for mortgage fraud tracked by the Federal Bureau of Investigation could skyrocket by nearly 300 percent this year.

Compared to 2007, mortgage fraud SARs in 2008 had already increased by more than 36 percent to 63,000. But just two months into 2009, the FBI has already documented nearly 29,000 mortgage fraud SARs. At that rate, some 174,000 SARs,

• a 276 percent increase

• could be filed by the end of the year.

And that's only what the FBI can see.

"Many mortgage finance-related entities are either loosely or completely unregulated at the state or federal level," said FBI Director Robert Mueller in recent testimony before the U.S. Senate Appropriations panel.

The good news?

"The current financial crisis has produced an unexpected consequence. They have helped reveal numerous mortgage fraud schemes, Ponzi schemes, and investment frauds, such as the Bernard Madoff scam," Mueller testified.

But while the Feds are catching up with Wall Street crooks, struggling homeowners on Main Street remain common prey. Despite tougher lending standards putting the kibosh on some types of home loan scams, organized wise guys continue to traffic in mortgage fraud.

That's prompted the U.S. Department of the Treasury, the U.S. Department of Justice (DOJ), the Department of Housing and Urban Development (HUD), the Federal Trade Commission (FTC), and the Attorney General of Illinois to launch new initiatives to pump up fraud investigations and step up enforcement actions, especially to protect homeowners seeking relief from President Obama's Making Home Affordable initiative.

The effort particularly targets loan modification and mortgage fraud.

Mortgage fraud, a relatively new form of organized crime, first cashed in on the greed that came with the boom market, when some buyers would do anything to own a home • including lie on the application. Cons, often insiders, also falsified documents, inflated appraisals and used other underhanded techniques to get home loans approved and properties flipped for a hefty profit when appreciation was skyrocketing.

With the housing market bust, however, came stricter underwriting scrutiny which helped stem the tide of loans approved with fabricated information.

Now, mortgage fraud is taking advantage of vulnerable, gullible homeowners facing foreclosure. Like those who once fibbed to cash in on the booming market, many struggling homeowners are likewise willing to do anything to remain homeowners.

Mueller said today's host of sophisticated scams are associated with new loan modification services, foreclosure bailouts, equity grabs, bankruptcy, identity theft and property flipping, among others.

Bruce Hahn, president of the American Homeowners Foundation, a non-profit advocacy group in Washington, D.C. says it's tough to tell the good guys from the bad without a scorecard.

"Some loan modification services are competent, but some are incompetent and there is another group of people who post ads to help with mortgage problems, but are basically fraudsters and fronts," Hahn said.

The FTC recently surveyed online and print advertising for mortgage foreclosure rescue operations nationwide and identified approximately 71 distinct companies running suspicious ads.

It's clear homeowners, who want to avoid being taken by the new scammers must likewise become more sophisticated.

The experts advise:

• Don't be a rube. If it sounds too good to be true • it probably is. Debts, bad credit and other financial holes didn't appear over night. They won't magically disappear over night.

"A fair number of homeowners have actually paid someone money before they see us. They see us because they paid and the company didn't do anything for them," said Martin Eichner, director of housing counseling services for Project Sentinel in Northern California.

• Be wary of strangers and unsolicited contacts, as well as high-pressure sales techniques. Avoid spam come-ons and web-based advertisements promoting the elimination of mortgage loans for an up-front fee to prepare documents to satisfy the debt. Beware of offers to "save" you from defaulting on loan payments or from foreclosure.

"The most outrageous of these schemes are offers to take your mortgage payment and hold them for you in a trust account. That is a total rip off. Never give your mortgage payment to any third party," Eichner said.

• Attempts to cajole you into making false statements in the name of mortgage relief is a red flag. Likewise don't sign blank documents or those you don't understand.

• Seek out family, friends, co-workers and others you trust who recently successfully solved a mortgage problem. Ask them for referrals. That applies to loan modifications, work outs, restructuring and refinance efforts.

"I would say contact a U.S. Department of Housing and Urban Development, but you can't just say that. We can't help everybody who needs help (because of overwhelming demand). If you hire a for-profit service you should be paying money only if (and after) they are successful. If they are an attorney, contact the state bar. For mortgage brokers (and real estate agents) check with the California Department of Real Estate," Eichner added.

Hahn also says to contact city and county housing offices for assistance and referrals and the latest information on legal, government-sponsored assistance.

Get more help from the Making Home Affordable initiative.

Published: July 23, 2009

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Broderick Perkins parlayed a career in old-school journalism into a contemporary digital news service that really hits home. The award-winning consumer journalist, originally from Wilmington, DE, is founder, publisher and executive editor of the bootstrap DeadlineNews Group, a Silicon Valley-based editorial content and consulting service specializing in residential real estate, consumer news and related editorial consulting services. The DeadlineNews Group includes the website, DeadlineNews.com, offering real estate editorial content and consulting services, and its back shop, the Deadline Newsroom, an open house on news that really hits home. Perkins obtained his formal journalism education from University of Delaware and a journalism boot camp, the Institute of Journalism Education at the University of California-Berkeley. He went on to 20 years of service as a daily newspaper journalist at the Wilmington, DE News Journal and San Jose, CA Mercury News. Perkins covered housing on the San Jose Mercury News reporting team which earned a General News Reporting Pulitzer Prize in 1989 for coverage of the Loma Prieta earthquake. He has also produced real estate, consumer and small business content for the Wall Street Journal, Los Angeles Times, RealtyTimes.com, Nolo.com, Better Homes and Gardens, the National Association of Realtors, Homestore/Move and Intuit/Quicken among more than three dozen publications. In addition to managing the DeadlineNews Group, Perkins most recently served as chief editorial consultant for Nolo's Essential Guide To Buying Your First Home, Nolo, and writes real estate television scripts for RealtyTimes.com.