Reported incidents of mortgage fraud nationwide increased 26 percent last year compared to 2007, with Rhode Island leading the way, according to a new report from the Mortgage Asset Research Institute (MARI).

Rhode Island ranked first in the country for mortgage fraud with more than three times "the expected amount of reported mortgage fraud for its origination volume," according to MARI.

Florida, ranked first in 2007 and 2006, dropped to second place, followed by Illinois, Georgia, Maryland, New York, Michigan, California, Missouri and Colorado rounding out the top 10 states for mortgage fraud.

"With fewer loan originations today, the data suggests that the economic downturn may have created more desperation, causing more people than ever before to try to commit mortgage fraud," said Denise James, LexisNexis risk & information analytics group director of residential mortgage solutions.  "Not only are we seeing traditional fraud trends, such as application fraud, but we are also seeing new types of emerging fraud occur," said James. "It is therefore imperative that the mortgage industry continue to share information and insights, and collaborate in the fight against mortgage fraud."

The top fraud incident type in 2008, representing 61 percent of all reported frauds, was application fraud, the fifth year in a row it topped the list. Second were frauds related to tax returns and financial statements, which jumped 60 percent from 17 percent of reported frauds in 2007 to 28 percent in 2008.