It's no secret that the country is facing a mortgage crisis. A record number of homes are in foreclosure. Many people were approved for and took on risky mortgages that, in the end, they couldn't afford. Some had adjustable rate mortgages and couldn't re-finance in a tough economy. And others were the victims of mortgage scams.

Local FBI officials tell us scam artists are part of the recent mortgage downturn. Officials say loopholes in the mortgage industry combined with tough economic times have allowed crooks to carry out schemes. The crimes have become so rampant that the FBI even launched a massive investigation dubbed "Operation Malicious Mortgage."

Tom Gancarz

Over the last few months, the "American Dream" of owning a home has been tarnished for many people. With foreclosures up, the FBI says many innocent victims are losing a home because they put their trust in the wrong people. "I think this problem increased due to the fact that people are scam artists, they figured out, 'Hey, this is something I can take advantage of and make money at,'" explains Tom Gancarz, an FBI Special Agent who investigates mortgage fraud schemes.

The FBI says mortgage fraud investigations have more than tripled in recent years. In 2003, the FBI had more than 400 open mortgage fraud investigations. And as of May 2008, the FBI already had more than 1,400 open investigations. "Some of these scams really take a sophisticated understanding of the entire process," says Indiana U.S. Attorney David Capp.

"It's the methodical review of documents, interviews -- some of these investigations could take up to a year, two years, before they're ready to be prosecuted," adds Gancarz.

David Capp

Right now, Indiana's Northern District has at least three pending investigations. One of those cases involves a former South Bend cop. In May, Robert Culp pleaded guilty to bank fraud. Culp admitted he was part of a mortgage scam that involved close to 200 homes in the area.

As part of a plea deal, Culp has to testify against others involved. "Culp is the first in what we believe will be a series of charges related to that scam," explains Capp.

Newscenter 16 contacted Culp and his attorney. They have no comment on the case. The FBI says the Culp case is typical of many mortgage lending schemes, where several people are working together.

Here's how a scam like it might work. Person "A" acts as a salesperson or realtor. They help find a home for the buyer. Meantime, Person "B," the appraiser, appraises the home at an inflated price, far over what the home is actually worth. And then Person "C," the mortgage broker, approves the buyer for a loan at the inflated price. In the end, it's the buyer and/or lender who lose out and fall victim to the scam.

The FBI says each player in the scam makes a cut of the inflated profit, and each depends on the other to pull off the hoax. "You need appraisals, brokers, supposed purchasers," adds Capp.

To protect yourself from becoming a victim of a mortgage scam, the FBI says the best advice is to do your research, read the fine print, know what you're signing, and know what the home is actually worth. "You want to really do your homework. It's really simple to go down to the county area where you're purchasing a home, to see what the value of that home really is," says Gancarz. "Usually if you're dealing with a reputable lender, they're not going to put you in a situation that you're in over your head."

The FBI also says these scams should be a reminder about the dangers of identity theft. In May, a Hammond woman was charged with stealing people's identities and using the information to secure mortgages or loans in those victims' names. The FBI advises people to beware of any cold calls or e-mails where people ask for identifying information.