On Monday, a dejected Matt Cox stepped into federal court in
Atlanta in handcuffs. His bogus real estate empire from Tampa, Fla.,
to Nashville, Tenn., lay in shambles.
Mr. Cox, a college-educated artist with a penchant for plastic
surgery, is charged with bank and wire fraud for bilking as much as
$25 million from banks in several schemes, including stealing the
identities of homeless people and securing mortgages based on
inflated appraisals, then walking away without paying a cent.
He is emblematic of the little-known shady side of the real
estate business. When the market was booming and with reputations at
stake as they marketed mortgage portfolios, huge lenders were loathe
to publicize the fraud, especially since a rising market often
erased their losses. But as the market cools and losses mount,
lenders are becoming more open - and are taking more steps to detect
fraud, analysts say. These moves are allowing prosecutors from
Orange County, Calif., to DeKalb County, Ga., to expose hundreds of
schemes that have wrecked individuals' credit scores, dotted
neighborhoods with foreclosures, and left banks - as well as
taxpayers - holding the bag for hundreds of millions of lost
"Boom periods provide very, very fertile territory for abuses and
those abuses become very clear when the psychology of the market
changes," says James Hughes, a policy analyst at Rutgers University.
Real estate fraud has now firmly emerged on the FBI's radar as
the country's fastest-growing white collar crime - all, in essence,
polite forms of bank robbery. Industry losses ran to at least $606
million last year, it says. And the Treasury Department's suspicious-
activity reports are up 35 percent this year. The Internal Revenue
Service's criminal case numbers in mortgage fraud have been doubling
every two years through the first half of this decade.
If the downturn continues past 2007, experts say the implications
for the economy could be dire."Real estate fraud is going to make
the S&L crash look like two cars in the parking lot that bumped into
each other at five miles an hour," predicts Ralph Roberts, the
author of "Flipping Houses for Dummies," in Warren, Mich.
Georgia is a major hot spot of mortgage fraud, where metro
Atlanta has become known as the mortgage fraud capital of the US,
according to rankings by Fannie Mae.
Here in Atlanta, as elsewhere, the problem has many causes. New
automated lending procedures, aimed at eliminating discrimination,
has made it easier for fraudulent applications to slip through. The
decline of local banking in favor of nationalized mortgage
syndicates also contributes to fraud, as does the recent move toward
sub-prime, high-interest loans. Opportunity for both large and small
scams by a coterie of real estate professionals, combined with
secretive and decentralized lending structures, means the system is
ripe for abuse, experts say. …