The occurrence of mortgage fraud increased by 26% from 2007 to 2008 even though the number of home loans being approved has dramatically shrunk.

According to experts, a lot of people are getting desperate in their situation and that drives them to commit mortgage fraud. Another factor to consider is tighter guidelines of financial institutions when scrutinizing the credit of a borrower.

Mortgage fraud also feeds on the confusion brought about by a very complex process during application.

People are doing it to get some commission or to get a home for their family. The 2008 data show that the most widespread fraud is application fraud.

Sixty one per cent of fraud application consists of misrepresentation during the application process. Misleading due to tax returns is second most prevalent mortgage fraud. The third dishonesty is over appraisal of a property.

Rhode Island is on top of the list of states where mortgage fraud is very prevalent. The recorded cases in the state is 300% more than what was expected.

Florida came in second for most mortgage frauds and Illinois came in third. Other top states are Georgia, Maryland, New York, Michigan, California, Missouri, and Colorado.

Security measures are being taken so loan and mortgage fraud can be decreased especially in the monitored hot spots. Stricter rules are also being implemented by financial institutions.