updated 5/13/2008 7:08:28 PM ET 2008-05-13T23:08:28

The sinking U.S. housing market is fertile ground for mortgage fraud, the FBI warned in a new report.

The agency said Tuesday that reports of suspected mortgage fraud rose 31 percent to 46,717 in fiscal 2007, which ended Sept. 30, 2007.

That was up from 35,617 in the previous fiscal year. In the first half of fiscal 2008, there were more than 33,000 such reports, quickening the pace of mortgage fraud for this fiscal year, an FBI spokesman said.

Last month, the Treasury Department, which uses the calendar year to tally reports, put the mortgage-fraud damage for 2007 at nearly 53,000, a 42 percent jump.

The FBI said that mortgage fraud losses in fiscal 2007 totaled more than $813 million, though only 7 percent of “suspicious activity” reports detailed the loss in dollars.

That number “is just the tip of the iceberg, reflecting only a small percentage of financial damage suffered by victims of mortgage fraud,” Kenneth Kaiser, the FBI’s assistant director in charge of the bureau’s criminal investigations division, said in a statement.

Banks and other financial institutions are required to alert the government of fishy financial transactions such as money laundering or check fraud.

Common types of mortgage fraud are misrepresentation of income or assets, forged documents, misrepresentation of a borrowers’ intent to occupy a property and inflated appraisals.

The depressed housing market provides an “ideal climate” for perpetrators of fraud, the FBI report said, adding that identify theft, particularly targeting borrowers with good credit, is likely to increase. It also warned of other scams, promoted as foreclosure rescues.

Earlier this year, the industry-funded Mortgage Asset Research Institute said Florida led the led the nation in mortgage fraud in 2007 for the second straight year, followed by Nevada, Michigan, California, Utah and Georgia.

The FBI is investigating more than 1,300 mortgage-fraud cases and conducting 19 corporate investigations linked to the subprime lending crisis. Federal authorities have formed a task force, headed by prosecutors in New York, to determine if lenders or Wall Street firms participated in fraud.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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