A San Rafael, Calif., law firm had added its icon to a home mortgage computer system, to help lenders fight loan fraud.

Users of Contour Software's Loan Handler program can select the icon to get in touch with the Prieston Law Firm when they are suspicious of a particular loan. Prieston's whole practice is mortgage fraud law.

Arthur J. Prieston, founder and senior counsel, said most mortgage banks do not fight fraud diligently. They often take a loss rather than fight to recover their money, he said.

"It's so simple to say, 'Let's allocate a loss,'" Mr. Prieston said.

He said his law firm is there to send another message.

"The goal is to communicate that lenders are taking fraud seriously," he said. "Prudent lenders are not going to just take a hit."

Mr. Prieston estimated that $16 billion was lost to mortgage fraud last year.

Mortgage banks' efforts to prevent fraud before loans are funded have waned during the last year. Staffing has been reduced at many quality control and fraud prevention units.

As a consequence, there's more work for firms like Prieston, which specializes in recoveries without litigation. Prieston charges a fee of $3,500 per resolution.

The law firm says it has settled cases involving 200 fraudulent mortgage loans worth more than $34 million. It lists among its clients such California lenders as Hamilton Financial Services Corp. of San Francisco, Medallion Mortgage Co. of San Jose, and Dollar Mortgage Corp. of La Mesa.

In mortgage-fraud recovery, time is of the essence, Mr. Prieston said. The secondary-market agencies usually give lenders 30 days to reimburse them for a loan deemed fraudulent.

Prieston uses its status as a law firm to press for settlements with borrowers. "The threat of a law firm is a hell of a lot greater than (that of) the servicing department of a mortgage bank," Mr. Prieston said. His firm has resolved 70% of its cases without going to court, he said.

The firm uses various approaches to prevent or recover losses from mortgage fraud.

When fraud is detected in a loan already funded, Mr. Prieston said, his firm first tries to get the borrower to refinance the loan with another lender.

Another strategy is to get parties to the fraud - appraisers or mortgage brokers - to contribute money for a refinancing.

Some properties are sold at a loss to the mortgage bank; then the law firm moves to set up repayment plans for borrowers to make good the loss.

Prieston's deal with Contour appears to be the first such arrangement between a law firm and a mortgage software provider.

Scott Cooley, president of Contour Software, said in a press release that the arrangement with the Prieston firm is a "perfect marriage" that will provide a valuable service to Loan Handler users.

Contour says 5,000 customers use the software. When they select the Prieston icon, they will immediately get a screen that asks for information about the loan. Prieston can begin its recovery procedures as soon as the form is filled out, Contour said.

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