Much of it might have gone undetected had it not been for the credit crunch as rising defaults have revealed the true extent of the problem.
The FraudBlogger index, which reflects a combination of the number of cases and the dollar volume, shows there were 1,488 cases last year, up from just 607 in 2007. In terms of dollar amount, Fraud cases in 2007 amounted to about $4 billion, about 25% less than in 2008.
Fourth-quarter 2008 activity nearly doubled from the prior quarter and was nearly 300% higher than a year earlier, the report said.
More than $1 billion in fraud was tracked in California alone, during the fourth quarter, pushing it to the top of the fourth-quarter state rankings. Much of that increase, according to the report, was tied to around 11,000 mortgage fraud investigations reported by the US Attorney in San Francisco.
New York ranked number two in the top ten worst states, with a much less, although still significant, $374 million in fraud cases. Florida, Minnesota, Nevada, Virginia and Texas followed.
'Although fraud is being uncovered at an increasing pace, the actual level of fraud on more recent originations has probably tumbled as production has dwindled and lenders have tightened guidelines,' the report says.
However, many industry insiders fear that mortgage fraud will continue to increase. David Vida, president of Acqura Loan Services said the concern is that modification fraud and even short sale manipulations will worsen. 'The worry is that people will manipulate the situation and take advantage of free-bees,' he said.