ALBANY — The State Commission of Investigation reported Thursday that mortgage fraud is on the rise in New York and has hit hardest in New York City, Long Island and the Rochester area, regions where subprime loans are most common.

But the commission also notes many homeowners with poor credit share the blame for losing their homes through defaulting on mortgages.

"It is clear to the commission that, from approximately 2003 through 2006, many New Yorkers who lacked sufficient financial means were put into homes that they could not afford," according to the panel's report.

"Credit was readily available, perhaps to a greater extent than it should have been, and lenders, mortgage brokers, real estate brokers and appraisers all profited from the purchase, sale and financing of houses," the report stated.

The commission reported that foreclosures statewide were up 14 percent in the first quarter of this year compared to the same period in 2007.

"To be sure, the overwhelming desire to own a home may have clouded their judgment, causing them to ignore commonsense and basic instinct regarding the affordability of their mortgages," the commission said of homeowners caught in the national credit crisis. "Owning a home was, perhaps, something they had dreamed of for a long time but could not otherwise have afforded under stricter lending standards."

The report identifies tactics unscrupulous real estate agents and mortgage brokers used to prey on prospective homeowners who weren't financially savvy. Worse, the report found as many as 10 percent of the thousands of homeowners burdened with subprime mortgages might have qualified for a less expensive, less volatile standard mortgage. But greedy real estate workers steered them to subprime loans at a higher rate.

The panel recommended changes in state law to strengthen protections for consumers. It called for licensing mortgage brokers and real estate appraisers to combat fraud and making it easier for prosecutors to prove fraud.

In June, the state Legislature and Gov. David Paterson created a 90-day "safety" period for homeowners facing foreclosure to meet with lenders and get information about how to cope with their debt and more fully understand their options. The new law also criminalizes some of the loan practices that contributed to the loss of more than 50,000 homes in New York so far. The state estimates another 38,000 homes could face foreclosure this year.