Mortgage fraud is running rampant across the United States, posing potential financial damage or ruin to homeowners and even the local community. The FBI reports that the illegal activity can have a domino effect on the local housing market and the economy at large.

While there are an infinite number of variations on fraud for profit, these are among the most common:

Flipping. This term has gotten confused because of TV shows such as "Flip This House," which isn't flipping at all. Those types of deals, in which houses are acquired legitimately, improvements are made and the houses are resold quickly, are known in the business as quick turns.

"There is nothing wrong with that," says Ann Fulmer, an attorney, mortgage fraud investigator and founder of the Georgia Real Estate Fraud Prevention and Awareness Coalition. "It becomes illegal when people start lying about the improvements, the value of them or (lying) to qualify the buyer."

Flipping involves a fraudulent appraisal and a grossly inflated sales price.

Straw buyers. One of the most frequent types of fraud occurs when "straw buyers" are used to hide the identity of the true borrower, who would not qualify for the mortgage.

"The perpetrators use a straw buyer because they have good credit and can get the loan," Ms. Fulmer says.

Straw buyers may be duped into thinking that they're investing in real estate that will be rented out, with the rental payments paying the mortgage. In fact, no payments are made and the lender forecloses on the loan. Or, sometimes, straw buyers are in on the scam and are getting a cut of the proceeds.

Appraisal fraud. Appraisal fraud is a part of most mortgage fraud scams. A dishonest appraiser inflates the value of the property. When the seller gets the check at the closing for a bogus amount, he pays off the appraiser and anyone else involved in the scam. Usually, the borrower doesn't make any payments and the house goes to foreclosure.

Foreclosure schemes. These are particularly evil because they prey on people with big enough financial problems that they're in danger of losing their home. A homeowner in the early stages of foreclosure may be contacted by a fraudster who says he can help the homeowner get rid of his debt and save his house for an upfront fee, which the fraudster takes and then disappears.

In another scheme, a homeowner is approached by a con artist who offers to help them refinance the loan. They sign documents and find out later that they actually sold the house -- to the fraudster. Then they face eviction.

Here are some tips for recognizing and preventing mortgage fraud:

For sellers

Get references for real estate and mortgage professionals, and check them. Make sure they're licensed with the state, county or city.

Be cautious about selling your property, especially if it's not currently on the market.

Do not agree to an amount above your asking price, especially if you are asked to refund the difference after the closing or if the extra money is to be used for repairs or improvements that you know are unnecessary.

Be wary of offers to "save" you from foreclosure. Work with your lender instead, and insist on getting a complete set of the closing documents.

For buyers

Be extremely wary of "no money down/cash back at closing" investment opportunities.

Check the sales history of the property -- several sales within a short period of time could indicate inflated values -- and have your own real estate agent or appraiser establish the value.

Check with your local tax assessment office or recorder of deeds to make sure the seller really owns the property.

Do not let someone else use your name or Social Security number to buy a property, especially if they offer to pay you for using it.

Deal directly with the lender or the mortgage broker. Do not let a third party arrange your loan.

For anyone

Insist on getting a complete set of the closing documents.

Do not sign any documents with information left blank or that contain inaccurate information.

Read and understand everything you're asked to sign, and talk to an attorney if you need something explained.