NEW YORK (MainStreet) — The housing crisis is entering its fifth year, and the wear and tear on homeowners and mortgage industry professionals is really starting to take its toll.

One benchmark illustrating this point is the Financial Crimes Enforcement Network’s Mortgage Loan Fraud Update, which reveals an 88% uptick in U.S. mortgage fraud cases in the second quarter of 2011 from the same period a year ago.

Overall, the agency reports 29,558 filed cases of mortgage fraud, though not all occurred in 2011. In fact, the FCEN says 87% of all cases occurred two or more years before 2011, and 63% of all cases occurred at least four years ago. That “delay” effect suggests the third and fourth quarters of 2011 may turn up an even bigger inventory of mortgage fraud cases as the economy fails to improve.

“We’re continuing to see a large number of [suspicious activity reports] filed on activity that occurred more than two years ago, an indication that financial institutions are uncovering fraud as they sift through defaulted mortgages,” says James H. Freis Jr., director of the FCEN.

“But we also continue to see indications of ongoing mortgage fraud activities,” Freis adds. “FCEN’s report released today raises awareness of the common scams that homeowners and lenders may encounter when arranging or modifying home financing.”

What kinds of mortgage fraud cases did the FCEN turn up most? Here’s a list:

Debt-elimination scams. These scams continue to be the most prevalent form of mortgage fraud, making up 19% of all reports filed. The FCEN specifically cites “bogus documents and payment methods that customers and third parties submitted to financial institutions in attempts to have their mortgage obligations eliminated.” Bogus checks and false deposits from a Federal Reserve Bank turned up the most in such cases, the FCEN reports.

False mortgage application statements. Home loan customers were really stretching the truth when trying to get a mortgage approved. The FCEN cites numerous cases of mortgage loan applicants embellishing their paperwork, usually by hiking their income, lying about their employment status and falsely stating their assets and liabilities. Mortgage borrowers also got creative in falsifying applications. The FCEN cites one mortgage lender who reported a fraudulent mortgage pre-approval letter prepared by a third party on authentic bank letterhead, but with a nonexistent branch address and loan officer name. The lender said the borrower’s real estate agent supplied the bogus letter.

Identity theft. Mortgage scammers returned to one tried-and-true method of tricking a lender into a loan – stealing another person’s Social Security number. The FCEN reports that 11% of complaints cited during the quarter used “invalid” Social Security numbers when applying for a property loan.

Other forms of mortgage fraud included short-sale fraud, where homeowners tried to use “undisclosed relationships” to complete short-sale transactions (mostly by using family members to buy their homes at discounted prices far below the home’s appraised value, with the homeowner staying in the residence). California, Nevada and Florida are at the top of the list of states where mortgage fraud occurred most often.

In these tough times, it appears more homebuyers, homeowners and mortgage industry professionals are adopting a “whatever it takes” approach to buying or staying in a home.

In that regard, mortgage fraud cases likely won’t abate until the economy improves and people aren’t forced to take drastic measures to buy or keep a home.

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