The FBI has carried out a number of investigations in Las Vegas, uncovering schemes involving 14 financial institutions. Some of the tactics include artificially inflating home values and forcing desperate buyers into adjustable rate mortgages that they eventually can't afford.

One FBI agent said Las Vegas is just the vanguard in a growing trend of mortgage fraud and expects similar discoveries, though less extensive, across the country in the next year or two.

"I think this is only the tip of the iceberg, not just in Las Vegas but all around the country," FBI special agent Scott Hunter said in February on National Public Radio. "One of the local detectives I work with said he used to get a complaint a month. Now they get several a day."

Nevada now ranks second behind Florida on the Mortgage Asset Research Institute's Fraud Index, a report that examines the current state of residential mortgage fraud and misrepresentation in the United States.

The report found that the areas of employment history and claimed income continued to be the most common types of fraud in 2007 loan originations.

Applications accounted for 60 percent of mortgage fraud in 2007, followed by verification of deposit (26 percent), tax and financial statements (20 percent) and appraisal valuations (16 percent). The total exceeds 100 percent because most incidents involve more than one type of fraud.

Terence Dickinson, a real estate development attorney from Michigan now living in Las Vegas, said 70 percent of subprime borrowers have fallen prey to fraudulent lending scams. Some of it involves speculation by lenders. Within weeks, mortgage companies sell loans to each other, sometimes increasing interest rates along the way, he said.

Federal law requires a lender to send a Notice of Transfer of Servicing to the borrower when mortgage payments must be made to a new loan servicer, but many "lending thieves" simply do not follow the law, Dickinson said.

"If you are a homeowner and were not aware that your adjustable-rate mortgage would consistently rise to the extent that it has, now it is a fixed rate which you cannot afford to pay and you lose your house," he said.

Conditions in the mortgage industry for the last half of 2007 made the year one for the record books, the Mortgage Bankers Association fraud report said. There were 46,717 suspicious activity reports during the year, compared with 35,617 in 2006.

Overall, 2007 marked the lowest volume of mortgage loan originations since 2002, the highest number of delinquencies and foreclosures, rapid shutdown of the nonconforming secondary lending market and hundreds of closures of mortgage originators.

"The current market conditions, compounded by mortgage fraud, are having a detrimental impact on our entire national economy," David Kittle, chairman-elect of Mortgage Bankers Association, said in a statement from Chicago, where the association is holding its annual mortgage fraud conference.

Many are at fault in predatory lending, said Cory Frey, senior loan officer for Southern Fidelity Mortgage in Las Vegas.

There's the mortgage bank that employed the originator to place a certain loan with a borrower, a loan that was "doomed should the market miss one step, let alone trip and fall on its face as it just did," he said.

There's the borrower playing the market who had to buy, despite his or her ability to pay back the obligation, just so they could realize a future return. And there's the loan officer who, with no hesitation, would do anything to make a buck and not explain certain parameters, Frey said.

"Much of what I encounter among today's dazed and confused borrowers is that many were simply not aware or did not understand their loan's features, such as negative amortization or its adjustable terms," Frey said. "Somewhere along the line, whether it be during the initial application or at the closing table, these borrowers were either not explained or did not care to understand the exact features relating to their loan's low payment."

Large institutions were advertising rates and payments to the unassuming public as if they were standard 30-year, fixed-rate mortgages when in fact they were not, he said.

"Not in any way, shape or form do I intend to place the burden on the borrower," Frey said.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or (702) 383-0491.