The number of mortgage fraud incidents has still reached an all-time high after lenders granted fewer home loans.  Last year, reported cases increased 26 percent compared to 2007 according to a report released Monday by the Mortgage Asset Research Institute.

The surge in incidence took place even as lenders implemented stricter lending policies. The more stringent criteria were implemented for borrowers to qualify for home loans include large down payments, solid credit and proof of their incomes.

The study cited that more than 60 percent of mortgage fraud cases last year points to falsified applications, while 28 percent came from tax returns or financial statements, and 22 percent came from appraisals. This is the fifth year that application fraud has topped the list.

Another factor is the improved diligence among lenders in scrutinizing borrowers and application details. Rhode Island occupy the top place with three times more mortgage cases than the expected cases based on the number of mortgages originated in the said state. The most common type of fraud in that state was inflated home appraisals.In other states, fraud on mortgage applications was the most prevalent.

Florida dropped to second place coming from the top most in the past two straight years. Illinois came in third, followed by Georgia, Maryland, New York, Michigan, California, Missouri and Colorado.With credit tighter, home loans had gone down by about a third to about $1.4 trillion.