Of every 100 stated-income loan applications, 60 overstated the borrower's income by at least 50 percent, said Ronan, vice president of Interthinx and a long-time fraud investigator. In fact, misrepresentation was so prevalent that only 10 percent of stated-income loan applications were on the money.

Sometimes the lie was perpetrated by the buyer, sometimes by the loan officer eager to make the deal and earn the often hefty commission. In either case, knowingly misrepresenting vital information constitutes mortgage fraud. But the problem, Ronan said, is that the fraudsters rarely got caught.

"It's rather safe," he said. "You don't have to have a gun. You don't have to stand on a street corner."

And we're all paying for it.

"Mortgage fraud is the X factor in the meltdown," Ronan said, citing it in $2.5 billion to $7 billion in lender losses.

Such a wide range suggests that no one really has a handle on the size of the problem. Among all types of mortgages, not just stated income, 25 percent of applications contained some type of misrepresentation -- bogus employment, income or asset information or undisclosed debts -- issues that have not disappeared.

Homes bought using fraudulent loan information have proven to be 20 times more likely to go into foreclosure, Ronan said.

The FBI and other law-enforcement agencies are investigating mortgage fraud, and lenders are scrutinizing loan applications much more closely than they had been.

But Ronan says that's just spawned more creativity among those who commit mortgage fraud. These days, they're targeting distressed homeowners in need of a short sale to unload a home that's worth less than they own on it.

Ronan says there are red flags sellers can watch for that may indicate a fraudster is targeting them:

-- Additional people all of a sudden are involved in the deal.

-- The sale seems much more complicated than usual.

-- There are "consulting fees" or "marketing fees" or even "decorating fees" involved.

So these days, it's not just "buyer beware." Sellers must be cautious, too.