CARLSBAD -- Amid mounting evidence that the post-2002 real estate boom was a house of cards, one North County company says its software can keep mortgage fraud from ruining things the next time around.

Founded in 2004, BasePoint Analytics initially pitched its fraud-prevention software to credit-card companies and mortgage originators such as New Century Financial.

More recently it has signed up investment banks, which package hundreds of loans into securities that can be traded like bonds. The mortgage-backed securities have become more common over the last decade, allowing lenders to issue more loans. Many in the mortgage industry have also said the securities have allowed lenders to become lax in scrutinizing their borrowers, since bondholders ultimately bear the risks of default.

BasePoint's software has monitored about $8 billion in mortgages, including mortgages newly packaged by five of the nation's 10 largest investment banks, said BasePoint Chief Fraud Strategist Frank McKenna. Word of the latest deal came Monday, when the company said Ocwen Financial Corp., a Florida-based mortgage-serving company, had signed on as a client.

BasePoint's software flags loans as having a high risk of fraud, for example, by comparing a borrower's stated income with his or her job. One red flag might be an elementary school teacher reporting a $200,000 annual salary on a loan application. Another might be a loan officer or mortgage broker who repeatedly makes loans to clients who stop payments within a year.

"When a fraud is happening, the context of who's interacting with the loan becomes just as important as the loan itself," McKenna said.

Studies by lenders and statistics from law-enforcement agencies indicate that loan fraud became more common in 2006 and 2007 than ever before. In a 2006 study of loans that required no verification of income, 95 out of the 100 borrowers exaggerated their incomes significantly, and 60 of them inflated their incomes by more than half, according to the Mortgage Asset Research Institute.

In U.S. Senate hearings last week, FBI Director Robert Mueller said last week that his agency is handling a "tremendous surge" in mortgage-fraud investigations, about 1,300 cases compared with 1,240 at the end of 2007 and about 430 in 2003.

One of those cases involves a Murrieta mortgage brokerage, Stonewood Consulting, that arranged 128 home purchases between late 2004 and mid-2006. Nearly all have since fallen into foreclosure, clients are suing, and the FBI raided the homes of Stonewood's former chief executive and a business partner in February. No criminal charges have been filed in that case.

While real estate prices were increasing rapidly, even borrowers who stretched their finances -- and the truth -- could refinance their homes to stay out of trouble, McKenna said. But that's not true anymore.

"Three to five years ago, people thought mortgage fraud was not a problem," McKenna said. "In a depreciating market, those lies start to matter."

But a lot has changed since the last real estate downturn, from 1993 to 1996, he said: For one, the increasing use of mortgage-backed securities has created a new market for automated fraud analysis. Second, mortgage companies' increasing use of computers makes it possible to comb through thousands of loan applications in a few minutes, he said.

Economists and real estate analysts have attributed the continued explosion in prices from 2002 to 2005 to looser lending standards -- and to some degree of fraud. And that set the market up for a huge crash in 2007 and 2008, they've said.

"A lot of those stated-income loans are the people who get themselves in trouble when payments resent," said Mark Oatman, president of North San Diego County Association of Realtors. "That dragged the pricing down."

Contact staff writer Chris Bagley at (760) 740-5444 or cbagley@nctimes.com.