Unless you’ve been on safari or just awoke from hibernation, you’d be hard-pressed to convince anyone that you hadn’t heard of the questionable lending practices that ultimately burst the real estate bubble. But there’s a lesser-known side to the story: mortgage applicant fraud.

“Applicant fraud is defined as any misleading or untruthful information that an applicant states on the mortgage application, as well as the failure to disclose information,” says Bob Hotter III, broker for the Michigan real estate firm ClickAnnArbor.com and loan officer for IM Finance LLC.

Though applicant fraud isn’t new, it’s on the rise. “Fibbing has been going on for decades,” says Eric Tyson, co-author of Mortgages for Dummies. “But it did increase during the real estate bubble.” While no one collects all mortgage fraud complaints, statistics from multiple sources show an increase, according to the FBI.

One example of mortgage fraud is when borrowers inflate their income to qualify — a common practice following the introduction of no-doc loans. But in these cases, Hotter points out, the lenders were as guilty as the borrowers.

“What the lenders who offered these programs were basically saying was, ‘You determine what you can afford,’” Hotter says. “Lenders primarily based those loans on the value of the property as well as the applicant’s credit score. Many of these loans were considered risky, but lenders were willing to take the additional risk in order to secure a higher interest rate.”

And for their part, the applicants assumed they would be able to refinance. “But now, some of those borrowers are seeing their interest rates rise from 6 or 7 percent to 13 percent,” Hotter says. “They can’t refinance in the current climate, and they’re losing their homes.” Because the lenders share the responsibility, he says it’s unlikely borrowers will face charges.

Another form of mortgage fraud is an applicant’s claim that the property will be occupied as a primary residence when it’s being purchased as a rental. “Applicants know that if they claim the property will be their primary residence, they will be offered more favorable terms on their mortgage, such as a lower interest rate and a lower down payment,” Hotter says.

This type of fraud takes a toll on the economy. “It’s easier to walk away when it’s not your primary residence,” Tyson points out. “One of the untold stories is the number of foreclosures that are the result of people who made investments that didn’t work out, and they’re just walking away. There are always foreclosures — even in a good economy. But it was different this time. Far more loans were made to people who had no skin in the game.”

Hotter has experienced this fraud. “An applicant came into my office claiming she wanted to buy a house and that it would be her primary residence,” he says. “I was totally fooled.”

But during a random spot check three months later, a bank representative learned that the house was being occupied by renters. Based on the buyer’s misrepresentation, the lender called the mortgage note due — forcing the borrower to either refinance through another lender or face foreclosure.

While this incident wouldn’t trigger an FBI task force, the applicant could face jail time. “That she made the payments on the mortgage and intended to continue to do so in good faith doesn’t change the fact that it’s fraud,” Hotter says. “She broke the law just the same.”

Ironically, because a conviction doesn’t affect a person’s credit score, it won’t stop an offender from obtaining future home loans.