Nevada has made the FBI's top 10 list of states for mortgage fraud investigation, an executive for a fraud prevention firm said.

Mortgage fraud probably totals in the billions of dollars nationally each year, and runs most rampant in hot housing markets such as Las Vegas, said Steve Schroeder, who founded Sacramento, Calif.-based CoreLogic in 1996. The company developed a tool to help prevent fraud based on an econometric model that identifies flaws in housing valuation.

"We found the majority of fraud in the mortgage lending marketplace came through mortgage brokers," he said. "We don't know if it's word of mouth or organized crime. Maybe someone says, 'If you really need a loan, go to Joe.' "

If borrowers want to push the limit on what they can spend for a house, Schroeder said, they're not going to apply with financial institutions such as Washington Mutual, Countrywide or Wells Fargo.

"They're going to go to mortgage brokers to see what they can do for them. We started to see concentrations of these cases from very specific mortgage brokers. These brokers who were concentrated, if they weren't participating (in the loan), they were facilitating."

Their numbers are small, perhaps five or six in Las Vegas among the 200 to 300 licensed operating brokers, Schroeder said.

"We process one-fourth of mortgages in the United States, and it's moving up pretty significantly in Las Vegas," he said.

Ed Gage, a mortgage broker in Sacramento, said another avenue for fraud is when mortgage brokers don't give accurate buyer qualifications to the bank.

He used as an example someone who wants to sell a house for $100,000. A buyer comes along and says he'll pay $140,000 for the home, giving the seller a down payment of $40,000 and financing the remaining $100,000.

"The lender gets stuck with the full amount," Gage said. Typically, lenders qualify buyers for about 80 percent of the home value, he said.

Mortgage brokers can commit fraud more easily in Las Vegas because of 30 percent to 50 percent appreciation rates over the past couple of years, Schroeder said.

"In some parts of Las Vegas, there's not as much demand as there is supply in some of the more distressed areas of the marketplace, but it's camouflaged by the overall market itself," he said. "That makes Las Vegas the perfect spot to conduct fraud. I don't know that there's anything the market can do until it stabilizes."

Another trick is to go through the mortgage broker instead of the lending institution for an appraisal of the home.

"If you call a mortgage institution, they order the appraisal and they hire the appraiser. If the borrower calls a mortgage broker, the mortgage broker orders the appraisal. If the broker has a buddy that's an appraiser, he gets the number he wants."