Alberta RCMP have laid dozens of charges against four men in a $3.9-million mortgage fraud scheme that the Mounties say is the largest they've ever seen.

The force also warned that mortgage fraud is a growing problem in the province because of its hot real estate market. The Alberta government says the schemes cost the public about $275 million a year.

The accused men live in three Alberta communities: Edmonton, nearby Sherwood Park and Athabasca, about 130 km to the north. The 60 charges include fraud over $5,000.

Police said the mortgages involved 32 properties in two small Alberta communities, using five mortgage lenders and affecting 22 victims directly.

The investigation was launched in November 2001 when a victim complained about a real estate investment gone sour.

RCMP Const. Terry Schmidt, of the commercial crimes section, said he wasn't able to give more details about the specific case.

However, he said mortgage frauds generally tended to be complex schemes involving a "controlling mind" who starts purchasing undervalued properties.

In one of the most common scams, the properties are sold repeatedly at increasing prices to buyers who are friends or acquaintances.

The person in charge then finds an investor, or "straw buyer," willing to obtain a mortgage on the property, which has an inflated value.

"They're called the 'straw buyer' because they're not a real buyer," said Schmidt. "They have no intention of moving into the home or owning it for any great period of time."

Schmidt says the "controlling mind" makes money by holding onto proceeds from the mortgage and leaving the straw buyer with a loan they can't pay.

The person behind the scheme also finds someone willing to move into the home and eventually assume the mortgage. The new homer typically has poor credit, has trouble getting loans and often defaults on mortgages, Schmidt said.

Finally, the properties are sold at the artificially inflated prices to people who aren't part of the scam.

Those people think they're making a good investment, but when they try to sell, they find out the market values of their properties are far lower than their mortgages.