Mortgage fraud has the potential to become a "national epidemic" that could expose lenders to hundreds of millions of dollars in losses, an FBI official said yesterday.

The number of FBI investigations into mortgage fraud has increased from 102 in fiscal 2001 to 533 in the first three quarters of this year, Chris Swecker, FBI assistant director for criminal investigations, said at a news conference. The investigations involve schemes that target lenders, such as property flipping, in which an individual buys the property at a low price, has it falsely appraised at much more than it is worth and then sells it for the inflated price. The lender or the government agency that insures the loan gets stuck if the new buyer defaults.

If interest rates go up and an increasing number of such loans go into foreclosure, losses will mount, Swecker said, according to a transcript. "There is just so much of it out there, and there's so much volume, and the banks are holding so many of these loans, that we just want to make sure we're working with the industry to get in front of the problem."

In one mortgage case in North Carolina, the FBI said, charges were filed this month against six people who were alleged to be involved in $130 million worth of fraudulent loans.

Since August, the FBI has identified more than 245 subjects in 158 investigations of financial institution fraud nationwide and has acted against 205 people. The sweep involves 47 FBI field offices and has led to more than 151 charges in 37 states. In addition to mortgage fraud, the cases include charges of insider fraud, check kiting, identity theft and check fraud. Swecker estimated that potential losses to banks and other businesses could be more than $3 billion.

The FBI said mortgage fraud is hitting hardest in several "hot spots," including Florida, California, Nevada, Michigan, Missouri and Illinois. In addition to property flipping, schemes involve doctored loan papers, faked identities and credit histories, forged loan documents, mortgage foreclosure "rescue" scams and the use of "straw buyers" to conceal the true buyer's name.

In the Washington area, at least 26 people, including real estate agents, appraisers, speculators, loan officers and buyers, have been prosecuted for mortgage fraud in the past three years, according to the office of the U.S. attorney's office in the District, with about a dozen investigations still pending. The loss to lenders and the federal government in those cases totals "in the multiple millions of dollars," said Channing Phillips, a spokesman for the office.

The FBI is working with industry "to get in front of the problem," said assistant director Chris Swecker.