The 2 1/2-hour exam gauges an agent's knowledge of federal laws, lending practices and state law. Bell said 7,000 lenders passed the test, about 1,000 failed and about 4,000 didn't bother to take the test and simply walked away from doing business in Utah.

But lenders alone are not able to commit fraud. "You need collusion," Bell said, sometimes with crooked appraisers or real estate agents.

Doug LeDoux, a fraud investigator for Utah, said would-be homebuyers need to be careful about deals that seem too good to be true. In many mortgage fraud cases, LeDoux said customers simply didn't want to ask questions because they thought they were getting such a good deal.

"There are cases where a customer is willingly naive. They may know that something is kind of questionable," LeDoux said, "but they go along with it because they want to get that house or get that refinance.

"At the end, when it's all done and they're broken and destroyed, they'll say, 'It just sounded funny, and I knew it was too good to be true, but I just couldn't help myself.' "

While LeDoux has seen people lose their homes and ruin their credit, he has also seen older couples, who have worked hard to own their homes free and clear, fall prey to mortgage fraud and lose their equity.

Mortgage lenders have been known to falsify information on loan applications, such as inflating a client's income information so they can qualify for a larger loan. Some work with appraisers who are willing to inflate the value of a home to also get a larger loan.

LeDoux said one man was doing home loans on vacant lots for $600,000 houses that didn't exist. "They were taking a vacant property, pretending there was a house on it and doing this big loan where really there wasn't a house at all," he said. What many perpetrators count on is that banks and lenders dealing with such huge volumes of loans and refinances won't notice and that their loan will simply slip through the cracks.

However, experts say there are some tell-tale signs that a loan might not be legal.

Homebuyers are literally flooded with stacks and stacks of documents that they are told to sign and initial. LeDoux said it might be worth it, especially for a first-time homebuyer, to have the documents reviewed by an independent lender, even if it might cost a small fee.

If the rate and return sound too good to be true, or when the appraisal price comes back too high, it might be a red flag.

Beware of identity fraud. Some lenders have been known to switch personal information, or worse, use your personal information to take out loans that you did not authorize. LeDoux said always double-check that your personal information on your loan application is correct. Also, within six months after closing a loan, you can run a credit report to make sure no one has taken out loans in your name.