Mortgages originated in the second quarter of 2008 reflected the trend that mortgage fraud most often occurs at the beginning of the loan process -- the application -- and an increasing amount of application misrepresentations, according to a quarterly fraud report released Tuesday by the Mortgage Asset Research Institute (MARI). "Successful fraud schemes often rely upon the singular nature of the lender’s origination processes," wrote the author of the MARI report. Reported incidents of mortgage fraud in the U.S. increased by 45 percent on fewer loan applications in the second quarter of 2008 from a year ago, according to the Lexis Nexis service. The data also shows an increase in certain fraud types since even the first quarter of 2008. A breakdown of the last two quarters reveals that more than 65 percent of fraud incidents in the second quarter are attributed to general application misrepresentation, a situation in which false information such as an incorrect name, misrepresented occupancy or assets is provided on the mortgage application. Income misrepresentation on loan applications rose five percent since the first quarter; asset and debt misrepresentation rose seven percent; tax return and financial statement misrepresentation rose four percent and verification of deposit and bank statement misrepresentation rose three percent, according to MARI's data. "It is not surprising now with tighter industry credit standards, that the largest percentage increases from quarter to quarter involve the financial profiles of borrowers," the report read, in part. A closer look into individual states' results show Florida once again topping the list with the most reported loans misrepresentations -- 21 percent of total reports -- in the second quarter. California came in second place with 15 percent of reported loans, and Illinois ranked a close third with 12 percent. Florida saw a five percent increase in general application misrepresentation in the second quarter, while California saw a 20 percent decrease and Illinois claimed the highest percentages of income and employment misrepresentation on the loan application, according to MARI. The institute included in the report three observations it said could help combat these high levels of mortgage fraud, all putting pressure on mortgage originators at the first stages before origination, "where most of the fraud occurs." According to MARI, these originating organizations need better technology tools to evaluate applications, more collaboration between each other to prevent fraud, and a general motion to stop suspicious loan applications at the beginning before origination. "Fraud is an industry problem and the industry must fight it together, recognizing that there is strength in numbers.  Lenders, investors, and insurers must implement extra steps now to insure that homeownership—the pinnacle of the American dream—remains attainable for credit-worthy borrowers," MARI said in the report. Read a summary of the report. Write to Diana Golobay at