By Bill Hewitt
Updated October 17, 2005 12:00 PM

As she surveyed her upscale Smoke Rise subdivision outside Atlanta, Ann Fulmer knew something was very wrong. Houses in the well-tended community were suddenly being bought and sold at a dizzying clip, sometimes changing hands twice in one day and many falling quickly into disrepair. Before long, a slew of tough-looking tenants began moving in, bringing with them a decidedly downscale air. There was even a shooting at a nearby home, and Fulmer noticed a certain red car that cruised around with one hubcap missing, then another—a sign, cops told her when she reported it, that it might be ferrying drugs. On a few occasions Fulmer tried to follow suspicious cars, only to have the cars turn around and tail her. “I’d put on my best soccer-mom smile and wave,” says Fulmer, 48. “The police suggested I get a gun.”

Instead she sought out something even more potent: information. Through her training as an attorney, she knew where to look, and with guidance from state and federal investigators, she knew what to search for. After scouring county records, she experienced a startling revelation. Her once gentle neighborhood had become a hotbed of mortgage fraud, a crime that Fulmer scornfully refers to as “bank robbery without a gun.”

Fueled in part by the boom in recent years in housing prices, the scam is increasingly common, afflicts thousands of communities across the country and costs banks and consumers an estimated $12.5 billion a year. And teaming with various government agencies, Fulmer not only helped stamp out the problem in Smoke Rise, she has become perhaps the savviest mortgage-fraud sleuth anywhere. “If I had any problem in Atlanta I’d call Ann before I’d call any law enforcement,” says Kevin Ludden, a lead investigator for Freddie Mac, the Federal Home Loan Mortgage Corporation. “What it takes others to figure out in weeks, Ann can figure out in a day.”

Her kill count bears that out. She estimates that she has helped authorities arrest 150 felons, including Chalana McFarland, a now disbarred Atlanta real estate attorney convicted of conspiracy, bank fraud, identity theft and money laundering in a $20 million mortgage fraud scheme. (On Aug. 24, McFarland was sentenced to 30 years in prison and ordered to pay $11.6 million in restitution.) Such is Fulmer’s reputation that in March, Chris Swecker, the FBI’s Assistant Director of the Criminal Investigative Division, invited her to lecture to 50 FBI agents on the ins and outs of the swindle. “It’s an epidemic,” says Swecker. “Our caseload has increased five-fold over the past four or five years. Ann talks about real life victims; it gives our agents a better understanding.”

Mortgage fraud is a relatively simple swindle, though one that usually requires the collusion of several people. “Say you have a hot market and a property is listed at $50,000,” explains Freddie Mac’s Ludden. Then, he says, the seller is approached by a potential buyer—who is really the mastermind of the scam—who offers to buy the property for cash. This “buyer” and a partner write a separate sales contract for $225,000 for the same property. To support that higher price, a corrupt appraiser falsifies his report in exchange for cash under the table. The second “buyer” then applies for a mortgage to cover $200,000 of the $225,000 transaction. The phony buyers give the original seller $50,000, then they split the rest. “Do 10 of those a week, that’s not bad money,” says Ludden.

It isn’t just banks that get hurt by the bogus sales. The gangs that engineer the schemes, some of which are also involved in the drug trade, often allow cohorts to use the newly purchased homes as crash pads. Within months, areas hit by fraud can take a sudden turn for the worse. “We had one home being rented by a group of teenage boys that turned into a drug-dealing house,” says Michael Swain, 39, who works for an information technology firm and whose Mountain Oaks community near Atlanta was one of those targeted by McFarland’s ring. “These kids were 15 to 18 years old and were driving Navigators and Mercedes. In one case a teenage girl came to a neighbor’s door naked and beaten up by some new tenants. Neighbors didn’t want to leave their homes.”

One painful irony is that, as these neighborhoods deteriorate, it becomes more difficult for owners to sell to legitimate buyers, and, at the same time, property taxes are rising because of the pumped-up sale prices. “I think fraud is skewing our tax rates,” says Swain. “When I compared the value of my house with similar houses, I found inflated, false prices.”

Out of desperation, Swain says he contacted a county official, only, to his surprise, to be referred to Ann Fulmer. “It seemed strange they would refer me to someone who was not a county employee,” he recalls. Strange, but fortunate, for Fulmer has a penchant for investigating. “My mom told me my first word was ‘why,'” says Fulmer, who grew up in Ohio and loved Nancy Drew mysteries as a girl. “I am a naturally very curious person.” Fulmer, who formerly worked as a tax assessor, began investigating the goings-on in Mountain Oaks using the same methods she developed for her own neighborhood. She pored over deed transfers looking for evidence of illegal flips, such as same-day sales of properties for hundreds of thousands of dollars in profits. She also searched for other signs of fraud, like foreclosures within the first year of purchase, and examined her own databases that cross-referenced suspicious transactions with the names of certain attorneys, buyers and sellers. Eventually, Fulmer identified more than 20 houses in Swain’s neighborhood that had been illegally flipped. Federal prosecutors were able to make such a compelling case that 16 of McFarland’s co-conspirators pleaded guilty.

To her own neighbors, Fulmer has become something of a folk hero. Says Pamelia Heisler, president of the community association: “She was instrumental in saving Smoke Rise.” Heisler recalls a nearby home that had been flipped, where the owners “had a succession of unsavory tenants. They didn’t have utilities, were cooking in the fireplace, and eventually burned half the house down.” With Fulmer’s help, she got the county to tear the house down.

Having helped reclaim Smoke Rise, Fulmer has taken her crusade on the road. She and her partners Julia Hiler-Barrette and Alicia Sheppard founded the Georgia Real Estate Fraud Prevention and Awareness Coalition, which helps prosecutors and homeowners across the state identify and combat mortgage fraud. She also lectures nationwide, speaking to real estate professionals and civic groups about the problem. And she recently became a vice president at a mortgage fraud prevention company. “I started doing this because it was hurting my family,” says Fulmer, the mother of two who has separated from her husband. “Now I do it because it’s just plain wrong. Plus there is a heavy price to pay-not just in terms of money, but also emotion. People want to protect their homes.”

Bill Hewitt. Linda Trischitta in Atlanta and Jane Sims Podesta in Washington, D.C.