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Reports of suspected mortgage fraud rose 42 percent last year as banks became more leery of lies on loan applications.

The Treasury Department’s Financial Crimes Enforcement Network said Thursday that there were 52,868 reports for mortgage fraud in 2007, up from 37,313 a year earlier. Mortgage fraud reports were the third-most common type of suspicious activity.

The most common type of mortgage fraud was misrepresentation of income or assets, followed by forged documents, misrepresentation of a borrowers’ intent to occupy a property as a primary residence occupancy fraud and inflated appraisals.

The Mortgage Bankers Association has called for more than $31 million over the next five years in new funding for the FBI and Justice Department to fight mortgage fraud, money that would go to new investigators and prosecutors.

This is just one of the reasons why most lenders today have pulled their stated-income loan programs, while others have raised the credit requirements to qualify for such loans.