Experts See More Identity Theft and Application Fraud.

There has been a notable increase in mortgage identity theft and application fraud, according to fraud prevention technology vendors who spoke as part of a panel on high-tech lending fraud recently.

"A year-and-a-half ago we started doing fraud identity theft seminars," Nigel Keniry, Midwest sales manager for Sysdome, Calabasas, Calif. told attendees at the Illinois Mortgage Bankers Association Taste of Technology Conference here. "Back then the instance of this kind of fraud was one in 20, six months ago it was one in 10 and now it's about one in eight. It's truly an epidemic."

D. James Croft, founder and CEO of Mortgage Asset Research Institute, Reston, Va., added that a recent study conducted by the Federal Trade Commission indicated that "in the last five years 27 million people in the U.S. had been victims of identity theft," he noted. "In 2003 alone, the amount of reported identity theft grew by 36% in one year."

The FTC report also estimated business losses of nearly $48 billion and consumer expenses of $5 billion due to this type of fraud. Also, the report concluded that it takes victims more than 200 hours of work spread over two years to four years to clear up their credit after fraud has been perpetrated on them.

The sixth annual MARI case report on fraud to the Mortgage Bankers Association distributed at the conference noted that the problem of identity theft goes beyond assuming a customer's identity.

"MARI has received several reports of incidents where the identities of mortgage industry professionals have been stolen and used in conjunction with the origination of fraudulent loans," said the report. "The identities of Realtors, loan officers and appraisers have been used by fraudsters as they impersonate mortgage professionals."

So, how does one keep their identity secure? "You can shred everything you want," said Connie Wilson, executive vice president at Weldon Spring, Mo.-based Appintell. "There are a lot of things that people talk about to prevent being a victim nowadays. On a humorous level, I think the best method is to have a really bad FICO score, because who wants it?