A traditional thief breaks into your house and steals televisions, jewelry and any cash that may be visible. Within minutes the house is ransacked and the criminal is gone. Your total losses are less than $1,000.

A white-collar criminal shows up at the county deed office with a bogus document reflecting your forged signature. Working with his associates, he then stages the sale of your property. At closing he walks away with a certified check from a financial institution.

When you discover the fraud, you now have to pay attorneys to retrieve not your television, jewelry and household cash, but the house itself. Your loses are now in the hundred thousands.

The only thing stranger than fiction is reality and mortgage fraud in all its varied forms is reality.

With 2 million Americans currently incarcerated, move over inmates because in 2005 financial institutions lost more than $1 billion from mortgage fraud, and in an efforts to stem the tide, the Federal Bureau of Investigation (FBI), Department of Housing and Urban Development (HUD), Office of the Inspector General (OIG), United States Postal Service (USPS), Internal Revenue Service (IRS) and the US Department of Justice have banned together in “Operation Quick Flip” to bring the criminals to justice.

According to a December 2005 FBI press release, the problem of mortgage fraud is one of the fastest growing white collar crimes in America and the definition can make even you a criminal.

When you financed your house, did you fudge your earnings figure just enough on the loan application to qualify for that mortgage? If you answered yes, “Go to jail. Go directly to jail. Do not pass go and do not collect $200” (as per the game Monopoly).

Although the Mortgage Bankers Association defines mortgage fraud loosely as predatory lending, and deceptive sales practices, the FBI defines mortgage fraud as any material misstatement, misrepresentation, or omission relied upon by an underwriter or lender to fund, purchase, or issue a loan.

Further, the agency breaks the crime into two categories, i.e. fraud for property and fraud for profit.

Fraud for property involves a borrower making false statements to qualify for a loan. Often times, a professional in how to qualify by making false representations coaches the borrower. The FBI claims that 20% of the cases investigated involve property fraud.

Lenders being forced to re-evaluate their losses are even filing criminal charges against homeowners that make fraudulent claims against their insurance when claiming a home was lost due to fire or other calamity.

Fraud for profit involves industry professionals that inflate property values (appraisers); provide false information regarding down payments; make false statements about the origin of the purchase money; alter credit history; make a false claim about the property being used as the primary residence when it is actually being purchased for rental or investment purposes; and the false identity of the borrower. This fraud accounts for the remaining 80% of the crimes prosecuted and/or under investigation.

One current case pending of this nature involves Terry Singh Mughar, 47 of Miami-Dade County and Jason Madow, 36, of Boca Raton. Charges have been filed against these two investors for bilking mortgage lenders out of $67 million in a scheme to finance the purchase of hotels in Orlando and South Florida (source: Sun Sentinel, Florida).

In just over a 90-day period, from July 5, 2005 through October 27, the FBI report shows that 156 subjects were indicted for mortgage fraud; 81 arrests were made; 89 convictions obtained; and 60 subjects sentenced.

The reported financial industry losses in these stated cases were $606,830,604. Colorado, Missouri, Illinois, Maryland, Georgia and Florida were all listed as “hot spots” in the epidemic of mortgage fraud cases.

In January, the Georgia Department of Banking and Finance revoked the license of Citi Financial Mortgage Corporation. Irregularities in loan documents were one reason sited for the revocation action.

However, not all mortgage fraud instances fall within the traditional framework. A case pending in Arizona involves the efforts of a credit collection agency to defraud homeowners out of their money and property.

Pacific States Credit Co. filed more than 600 liens in Maricopa, Prima, and Pinal counties in Arizona within the past two years. Several hundred more property liens were filed in northern California. The liens were filed against property owned by debtors for credit card bills.

According to an account in the Arizona Republic newspaper, many of the debts were either fictitious or settled prior to the liens being filed. The liens were discovered by unsuspecting homeowners when doing title searches on their property. When attempting to refinance, or sell the property, owners were required to clear the liens by paying the debts at closing or getting a release from the creditor.

As is the case with most crimes, the victim was left with the loss. Even more obtuse is the fact that the jurisdictions issuing the liens do not determine the validity of the claim prior to recording the attachment against the property in question.

In a statement quoted in the Clarion Ledger (Mississippi) earlier this year, Assistant U.S. Attorney Cindy Eldridge, 41, said of the growing problem around the country, “If you just take mortgage-fraud cases, I could do those until I retire.”

She is currently immersed in cases under the Jackson, Mississippi regional office jurisdiction involving falsifying documents to obtain a mortgage; using fake loans to launder money; and cases involving skimming a portion of the loan.

All these cases are currently being tried under provisions of existing banking laws, mail fraud and other various regulations. However if the U.S. Senate passes a law introduced by Senator Barack Obama of Illinois, that will all change.

On February 14, Obama introduced a bill known as Stopping Transactions Which Operate to Promote Fraud, Risk and Under-Development (STOP-FRAUD) Act. The bill, if passed as written, would provide federal penalties for up to 35 years in prison and $5 million in fines.