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Housing Boom Tied To Sham Mortgages
Phillip Hill bought this North Atlanta mansion for $1.4 million in 2001 and, with the help of a phony appraisal, sold it for $3 million a few days later.
(By David Cho -- The Washington Post)
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Hardest-hit by the scheme were honest homebuyers. Mortgage fraud experts estimate that Hill's scam, and others like it, have put several thousand homes into foreclosure, driving down values.
Bill Cleary was one of the first to buy a condo in Deere Lofts, in a bustling area in downtown Atlanta. He was lured by the amenities -- hardwood floors, high ceilings -- as well as advertisements glamorizing the area. In 2001, he paid $213,000 for a two-bedroom unit.
Then Hill bought 40 units at a discount from the builder and started flipping them for about $400,000. The non-Hill condos left on the market were quickly snatched up.
But all of Hill's units ended up in foreclosure. Because Hill stopped paying homeowner dues, the condo association nearly went bankrupt and the building went downhill. Three years after Cleary bought his place, comparable two-bedroom units were selling for $130,000. "All of the promises they made went up in smoke," Cleary said of the developers.
Anne Fulmer's neighborhood, in Atlanta's affluent northern suburbs, has been hit by four mortgage fraud rings since the late 1990s.
The scams motivated Fulmer and others to form a coalition of prosecutors, police, homeowners and real estate agents to fight back. The Georgia Real Estate Fraud Prevention and Awareness Coalition got a tough mortgage-fraud law through the state assembly.
In national surveys, Georgia has been identified as a fraud hot spot. But Fulmer says that is because people there have become so aggressive about identifying the problem. She says she wonders how many homeowners across the country bought in neighborhoods where values were driven up by fraud but don't know it yet.
"It happens everywhere and anywhere," said Fulmer, who is now vice president of Interthinx, an anti-mortgage-fraud company. "If the true scope was discovered, I think it would cause a major crisis."
