In the last few years countries with strong housing markets like the United States, Canada and the United Kingdom have seen a significant increase in mortgage fraud cases. The U.K. and Canada in particular are discovering hard-to-ignore parallels between mortgage fraud scams and organized crime syndicates.

Mortgage fraud is defined as the intentional misstatement, misrepresentation, or omission by an applicant or other interested parties, relied on by a lender or underwriter to provide funding for, to purchase, or to insure a mortgage loan. This common type of fraud affects everyone because it leads to inflated property values and higher property taxes. In America's case, the increase in mortgage fraud is contributing to the subprime mortgage crisis.

There are three distinct forms of mortgage fraud - fraud for property, fraud for profit, and fraud for criminal enterprise. Fraud for property is usually committed by people who overstate their income or lie about their credit history, but who generally still intend to pay off their mortgages. Fraud for profit and fraud for criminal enterprise, on the other hand, are usually the more serious crimes because they involve elaborate schemes where the intent is to illicitly gain proceeds from property sales.

According to a Criminal Intelligence Service Canada report titled Mortgage Fraud and Organized Crime in Canada, "losses from mortgage fraud in Canada range into the hundreds of millions of dollars annually."

The report warns financial institutions that as technology is increasingly relied upon to conduct mortgage transactions, they will remain highly vulnerable to mortgage fraud.

"Numerous criminal groups across Canada are involved in a wide variety of mortgage frauds for profit or to further other criminal activities," the report stated. "Organized crime will continue to exploit professionals within the financial and real estate industries who will knowingly or unknowingly assist them in their fraudulent activities."

The Association of Chief Police Officers of England, Wales and Northern Ireland (ACPO) issued a report March 5, 2008, that stated mortgage fraud was coming up during police investigations into U.K.-based terrorist groups.

"Whilst there is no evidence to suggest that mortgage fraud directly funds terrorist acts... mortgage fraud can be used to finance infrastructure including 'safe houses'," the report stated.

According to Mike Bowron, London police commissioner and lead on economic crime for ACPO, "Organized mortgage fraud remains a significant element of the U.K.'s annual fraud losses."

"Long gone is the notion that fraud is a victimless crime," he said.

In the United States, illegal property flipping, which entails false appraisals and other fraudulent loan documents, is the most common form of mortgage fraud according to FBI statistics and data. To curb it, in 2008, nine U.S. government agencies formed a task force to participate in "Operation Malicious Mortgage." Three areas of mortgage fraud came under FBI investigation - lending fraud, foreclosure rescue schemes, and mortgage-related bankruptcy schemes. The FBI issued a report on June 19, 2008, that said the task force is also investigating 19 subprime-related corporate fraud cases that FBI Director Robert Mueller said deal with accounting fraud, insider trading, and failure to disclose the proper valuations of the securitized loans and derivatives.

In the report, the FBI announced more than 400 defendants across the nation had been charged with mortgage fraud thanks to Operation Malicious Mortgage. Already the FBI says there have been more than 170 convictions and more than 80 sentencings that have resulted. Those crimes alone accounted for more than $1 billion in estimated losses and the seizure of more than $60 million in assets.

No matter what type of mortgage fraud occurs, the effect can be devastating. When a home is foreclosed it affects the neighborhood, the lenders, the homeowners, and the economy. For that reason, the ACFE will continue to offer mortgage fraud training to help examiners detect and deter this common form of fraud.