The FBI says that 2008 is shaping up to be a "record year" for mortgage fraud, with nearly 30,000 "suspicious activity reports" filed in the first half, compared with 46,000 for all of 2007.

According to the New York Times, "the biggest surge in federal law enforcement activity has focused on "fraud for profit" schemes, in which mortgage insiders - appraisers, real estate agents, loan officers, and lawyers - often work in teams. They falsely inflate a home's value, get a huge mortgage to buy it (usually using false identities), split the profits, and then disappear."

And then there are the more plain vanilla, less conspiratorial forms of mortgage fraud, including inflating income on loan applications, a practice that appears to have been encouraged at JPMorgan. The TowerGroup reports that lenders will lose about $2.5 billion to mortgage fraud this year.

As with many forms of crime, the victims of mortgage fraud included pretty much anyone who wasn't participating: banks have to increase fees to cover the cost of losses to fraud, and loans made to people who lied about their finances flushed funny money into the system, inflating property values and pricing many first-time home buyers out of the market. It's like trying to compete with Flinstones Chewables in a league where everyone else is on steroids. The extent to which mortgage fraud played a role in the housing bubble remains to be seen, but it's likely that fraud and lax lending practices were a substantial drivers of soaring home prices.

Another angle on this: because people used mortgage fraud to buy homes they couldn't really afford (If they could really afford them, there would have been no need to lie!), there's a good chance that many of the people who stand to benefit from plans to "help" homeowners facing foreclosures engaged in fraud to acquire their homes.

As more and more people become desperate to find some way to keep their homes, they turn to "foreclosure rescue" experts and other scam artists, when traditional lending sources dry up. USA Today reports that Federal mortgage fraud convictions more than doubled in 2007 and they expect the numbers to go even higher in 2008. The FBI opened 1,210 mortgage fraud cases in 2007, which are nearly triple the number of new cases in 2003, according to USA Today. Convictions, which totaled 123 in 2006, were up to 260 in 2007.

The FBI created 34 mortgage fraud task forces and working groups.These groups include investigators from HUD, Treasury and Veterans Affairs. FBI Financial Crimes Section Chief Sharon Ormsby told USA Today that "low interest rates, rising home values and low lending standards "created the perfect storm of lending fraud." The FBI is finding deceptive pricing and falsified documents by mortgage brokers, lenders, appraisers, real estate firms and others.

Scammers focus on people desperate to keep their homes when their loan rates reset or a balloon payment is due. They are also starting to prey on homeowners 62 and older who seek reverse mortgages. One common scam involves a "foreclosure rescue" expert convincing home owners in trouble to sign over their deed to a third party who can qualify for a second mortgage. The scam artist then pockets the cash and defaults on the loan. The home owner then faces foreclosure. In one case cited by USA Today, six people were charged by a New York grand jury with allegedly stealing more than 80 homes this way. If anyone asks you to sign over your deed, just don't do it!