The City watchdog today stepped up its battle against mortgage fraud and called on lenders  to act as whistleblowers against brokers suspected of breaking the law.

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The Financial Services Authority said this is "a serious and widespread problem", urging  the industry to "do its part in tackling this menace". It pledged to raid 200 brokers over  the next 18 months to flush out rogues.

In the US, a huge FBI clampdown has led to the arrest of more than 400 developers, estate  agents and brokers over alleged frauds worth $1 billion. The FSA's main target is brokers  who induce customers to lie about their earnings to secure a mortgage or obtain a larger  one. This can leave customers stretched or unable to meet payments when rates go up.

Philip Robinson, director of financial crime and intelligence at the FSA, called on lenders  to report suspect brokers rather than just wave the loans through.

"We have set out our approach and expect the industry to do its part," he said. "Brokers  should make sure their businesses cannot be used for the purposes of committing fraud.

"Lenders must also have in place systems and controls to identify and reduce fraud."

There are fears mortgage fraud could now increase as brokers struggle due to falling  demand.