Investigators for the FBI, state Mortgage Lending Division and local law enforcement said complaints of mortgage fraud are picking up and will undoubtedly increase as the number of properties entering foreclosure continues to rise.

Many of the complaints involve falsifying home mortgage applications, including exaggerating incomes and claiming investment properties as a primary residence.

Those complaints will result in the filing of more criminal cases in the coming months, investigators said.

"Mortgage fraud is just beginning to jump by leaps and bounds in this town," said Pete Dustin, a part-time white-collar crime investigator for Metro Police. Dustin said the number of complaints has risen from one or two a month to one or two a day.

"When everybody is getting paid, nobody cares. The second they start instituting foreclosure proceedings, they pay attention. The lending institutions are going to start screaming."

Nevada has the second-highest rate in the country of homes entering foreclosure — a rate that is expected to rise by the end of the year and in early 2007 as mortgage payments increase sharply for those with adjustable rate mortgages. Some of that growing foreclosure rate is attributed to fraud.

According to foreclosure-tracker RealtyTrac, one out of every 452 Nevada homes entered the foreclosure process in September, for a total of 1,919 properties beginning the process. The number is up 237 percent from the 569 properties that entered foreclosure in September 2005.

Nationally, one out of 1,030 homes had a foreclosure filed in September. Colorado is the only state with a higher rate than Nevada, with one out of 408 homes entering the foreclosure process.

Scott Bice, commissioner of the Mortgage Lending Division, which investigates complaints and forwards cases to the state attorney general and other law enforcement agencies, said his office has 300 active complaints, many of them dealing with mortgage fraud.

"This is as high a complaint log I have seen in three years in business," Bice said. "And I don't see it slowing down. Right now with the slowdown in the market, all these little things are popping up. In a rising market, even if people inflate, everything bails them out."

One of the most prevalent mortgage frauds committed is buyers stating on their loan applications that the home they're purchasing is their primary residence, when they only intended to acquire it as an investment property and flip it, authorities said. By claiming that, the buyer was able to secure a better interest rate and terms such as a lower down payment.

In other cases, buyers misstated their income to secure mortgages or mortgage brokers coached them to doctor their applications as a way to secure loans.

Even though falsely filling loan applications is a federal felony that can carry a prison sentence and fine, authorities said their focus tends to be on more widespread fraud that involves several people and properties and losses exceeding $1 million in some cases.

"Mortgage fraud is a problem that we see a lot of, but the FBI doesn't have the resources to investigate all of the cases," said David Nanz, a special agent with the Las Vegas FBI who investigates white collar crimes.

The agency's primary mission is counterterrorism and foreign counterintelligence, Nanz said. When it comes to white collar crime, the main focus is corporate and securities fraud, not mortgage fraud.

But if there are cases in which the person has a criminal history and the fraud is widespread and leads to a large dollar loss, the FBI will take the case, he said.

Authorities cited cases they are investigating in which mortgage brokers, working in cahoots with buyers, submitted loan applications to various lenders for the purchase of more than a dozen properties. The buyer didn't have enough income to qualify for that many loans.

In other cases, false appraisals were used to obtain a loan for more than a property is worth, setting up schemes with an orchestrated buyer and seller that allows the seller or a management company to pocket excess funds.

There are several other fraud scenarios as well, authorities said.

"The problem with mortgage fraud, and it's true with white collar crime (in general), is that it pays well," Bice said. "The way the system works is that people don't report fraud until there are losses. Mortgage fraud is that dirty little thing that people don't talk about because once they start bringing it up, they are liable for their actions or losses."

Lenders, in order to recover losses, file lawsuits against mortgage brokers, escrow companies and title companies, officials said.

Steve Schauer, president of National Lenders Service, a local mortgage broker, said he's not surprised authorities are investigating more fraud cases and pointed out those problems in the industry hurt legitimate borrowers who want to purchase a home.

"The white lie in my opinion is more and more lenders are falsifying documents," Schauer said. "It doesn't show up until the foreclosures happen and it hurts all of us."

Bice and others said the blame for mortgage fraud is shared by the perpetrators and the entire industry.

He cited one recent investigation in which an elderly woman who bought a home in Summerlin had a credit score of 800 and $150,000 in the bank. She stated her income as $6,000 a month when she only made $900 a month in Social Security. She spent the $150,000 on upgrades to the house and couldn't afford the $3,500 mortgage, prompting foreclosure proceedings.

"She got talked into it at the builder's tract and everyone along the way was helping themselves out with her money," Bice said. "She should have known she couldn't afford a house like that, but she got caught up in it."

Nanz said one of the biggest causes of the mortgage fraud in Las Vegas is lack of due diligence by lenders. He said there have been cases in which a buyer will claim a certain income and the lender won't even contact the employer for verification.

"In my view, I think it is a rush to make loans," Nanz said. "The bottom line is they are trying to get as many loans as they can."