Mortgage Fraud: Souther Cal

Mortgage fraud surged in Southern California as borrowers overstated income, exaggerated assets and hid debts to qualify for expensive mortgages, authorities and industry observers said.

The FBI said lenders filed nearly 4,300 reports of suspicious activity in the first 11 months of the fiscal year ending Saturday - on track to double last year's total.

Thus far, people who lied about their income to get a loan and later found themselves strapped have been able to make payments by refinancing or selling property for a profit.

That could no longer be an option with home prices flattening or declining. Those without sufficient equity may be forced to sell for a loss or default on payments.

"This is the calm before the storm," said Steve Smith, a Redlands appraiser who lectures frequently about real estate fraud to industry groups.