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Fulton County is No. 1 in the nation in mortgage fraud, Federal National Mortgage Association data show. And DeKalb County is not far behind, ranking No. 3 nationally, according to Fannie Mae data for 2002 and 2003. The rankings caused state Sen. Vincent D. Fort, D-Fulton, on Wednesday to warn the real estate and banking industries to take action before the government comes up with its own solution. Fort’s district is rife with foreclosures — many of which he said are the result of fraud. Fort drew an analogy to Georgia’s legislative battles to curb predatory lending. The banking industry “knew better than anyone what was going on with predatory lending,” he said. “They did not act on it.” While banks and borrowers usually are the legal victims of mortgage fraud, the crime also negatively impacts the neighborhoods where it occurs. Houses that slide into foreclosure because of fraud are often left to deteriorate and become a blight on an area. Illegally inflated appraisals may cause property taxes to rise in an entire neighborhood, even though legitimate owners can’t sell their homes at those prices. Fannie Mae identified problem mortgages by ZIP code to obtain the ranking, according to a spokesman in Washington. ZIP codes beginning with 303, most of which are in Fulton, generated more mortgages containing misrepresentations than any other ZIP code cluster in the nation. ZIP codes beginning with 300, which include nearly all of DeKalb as well as parts of Gwinnett, Rockdale and Cobb counties, generated the third-highest number of loans with misrepresentations. Charlotte, N.C., originated the nation’s second highest number of loans containing misrepresentations, according to Fannie Mae. Two years ago, Fannie Mae ranked Fulton fourth and DeKalb sixth nationally. While Fannie Mae generally releases information on nationwide mortgage fraud hot spots only to mortgage industry insiders, a spokesman acknowledged the Fulton and DeKalb rankings when the Fulton County Daily Report requested the data. The rankings are derived from the number of all Fannie Mae mortgages originated in Fulton and DeKalb in 2002 and 2003 that contained misrepresentations, a strong indicator of fraud. Types of misrepresentations included loan applicants’ names, Social Security numbers, tax information, pay stubs, employment verification, bank accounts, escrow fees, appraisals and credit histories, according to Fannie Mae. A Fannie Mae spokesman declined to release the percentage of problem loans identified in Fulton and DeKalb, saying the information was proprietary. THE LURE OF EASY MONEY Metro Atlanta mortgage fraud expert Ann D. Fulmer, an attorney and co-founder of the Georgia Real Estate Fraud Prevention and Awareness Coalition, calls mortgage fraud “a cancer.” Fulmer, who first began fighting an influx of fraudsters into her Stone Mountain community eight years ago, said instances of mortgage fraud are skyrocketing in metro Atlanta because, “More and more people are finding out it’s a pretty easy way to make money. When you are talking about an already criminal element, it’s a lot less risky than drug trafficking. Nobody is shooting at you at a real estate closing as a general rule.” She continued, “Prosecutions are so laborious they are not undertaken because of the scope of the problem.” And, she said, when fraudsters are caught and prosecuted successfully, mortgage fraud is often viewed as a “petty white-collar crime” that carries only a minimal sentence. Fulmer also said that Atlanta’s explosive growth over the past decade and the ongoing gentrification of inner-city neighborhoods has made hiding mortgage fraud relatively easy. Typically, fraudsters use fraudulent appraisals to exaggerate the value of a property, then abscond with the loan proceeds. In Atlanta, that’s easy to do. Even when houses are sold and resold within weeks at a substantially higher price — a practice known as “flipping” — those quick turnarounds often are occurring in or near neighborhoods where legitimate renovations are taking place, Fulmer said. “Even if you are a legitimate appraiser, you can find [real estate] values all over the map.” ‘HOT SPOTS FOR MORTGAGE FRAUD’ Fulmer suggested it is no coincidence that gentrifying neighborhoods in East Lake, East Atlanta and the West End “are the same areas we are hearing anecdotally are the hot spots for mortgage fraud.” This month, as Fulton foreclosures rose to a nearly record 754, the West End and Adair Park in Fulton reported more foreclosures, 98, than any other Fulton ZIP code, according to foreclosure data compiled by the Daily Report. Those neighborhoods are also riddled with mortgage fraud, according to one Fulton suit seeking damages from several real estate investment firms, appraisal companies and closing attorneys who have been involved in a string of West End real estate deals. Fort, whose district includes those neighborhoods, said his biggest concern is the damage that fraudsters are inflicting on the West End real estate market. “This kind of mortgage fraud drives up assessments and, thus, property taxes artificially in those neighborhoods and puts a burden on those property owners in the area,” he said. At the same time, fraudsters who secure multiple mortgages keep the money, fail to pay the loans or maintain the properties, and allow those mortgages to slide into default. “The victims of this kind of mortgage fraud are not only the people directly involved who are ripped off — the banks, etc.,” Fort said. “It’s also the neighbors and others who live nearby. That is the thing that concerns me greatly about this. … Generally, that leads to a deterioration of the neighborhoods.” PRIORITIZING FRAUD PREVENTION Fort said there are laws on the books designed to punish mortgage fraud. But, he said, it is important that state and federal prosecutors consider taking “a more aggressive posture on this.” In addition, he said, the real estate and banking industries need to police themselves. “It’s incumbent upon the industry to prioritize this and self-police,” he said. What the real estate and banking industries should do, according to Fort, is “make partnerships with consumers to take care of this. … Sooner or later, the public is going to become better educated on this issue. As a result of this education, they are going to become outraged and call for action. At that point, the industries’ ability to determine the outcomes are going to be limited, just like predatory lending.”

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