A report released recently claims that cases of false reporting in mortgages rose 7% in 2009. The report notes that this rise is far less than previous years thanks to increased industry reporting and policing. But these measures can’t keep everyone safe.

Fraudsters look for vulnerable homeowners who are desperate and confused by their situation. The legal and financial hoops that borrowers need to go through to save or sell their homes can make them prime targets for those seeking to take advantage of them.

The report urges companies in the mortgage industry to reevalutate how they oversee their processes and file fraud incidence reports. Fraud schemes are only going to get more complicated.

The number one trick to look out for is application misrepresentation. Second in the list is fraud regarding appraisal and misrepresenting value.

If fraud isn’t curbed, the industry is going to have to take drastic action to combat the risk involved. This could have negative consequences on everyone’s ability to complete short sales and do other transactions.

If you’re involved in a short sale on whatever side of the deal, make sure you get all the facts and legal jargon clear. You might just wind up getting yourself (and the rest of us) in hot water.