Borrowers who steal money from a lender constitutes mortgage fraud when and if the security that was promised is not given to the lender as agreed upon, or other conspiracy to defraud a lender is uncovered.
If a borrower can obtain false appraisals and borrow money above what the property is worth without any intention to repay to loan, this is a type of mortgage fraud. Engaging a third party and their good credit to become an owner of the property with ill intent also constitutes mortgage fraud.
To all together avoid mortgage fraud in trust deed investing is to methodically and appropriately evaluate the credibility of every party who is/ will be involved in a given transaction. This will create an environment for smoother transactions that make sense for all involved parties.