10 Worst Cities for Potential Mortgage Fraud

The housing market has been improving significantly for nearly a year at this point, but with those upticks in activity across the board in the last several months, it seems that instances of potential fraud also increased.

The total amount of possible mortgage fraud nationwide rose 1.1 percent from July to September 2012 from the previous quarter, according to new statistics from Kroll Factual Data. And while there were increases in every region across the country, these were caused not by low-level jumps in most places, but rather massive leaps in specific metropolitan areas.

"This spike in potential fraud is troubling, coming at the same time the mortgage industry is beginning to turn the corner," said Rob Bazzani, president of Kroll Factual Data. "More importantly, the fact that red flags are rising in every area of the country highlights the continued need for lenders to remain vigilant against fraud. In addition, the new Consumer Financial Protection Bureau restrictions -- whose ultimate goal is to ensure a borrower can repay a mortgage over its entire term -- raise the stakes for lenders to catch fraud or inadvertent errors that might compromise lending decisions or risk buy-back requests."

On the other hand, a number of cities also saw significant declines in potential mortgage fraud, though those declines weren't enough to make up for the surges seen elsewhere, the report said. Champaign-Urbana, Illinois; Bridgeport-Milford, Connecticut; and San Francisco-Oakland, California all saw declines of 18 percent or more, and a number of other cities also came in with drops of more than 17 percent. See the cities where potential mortgage fraud rose the most in the gallery below.

Experts say the housing market should continue to recover over the next year at least, as rising prices will urge more sellers into the market, which will in turn meet already-high buyer demand that has been boosted by interest rates hovering at or near record lows.

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