CNN Heroes: Homeowner uncovers mortgage fraud

STONE MOUNTAIN, Georgia (CNN) -- In 1996, stay-at-home mom Ann Fulmer got suspicious about strange happenings in her neighborhood.

"It was just kind of odd. People were paying way too much for houses and then not bothering to move in," she said.

"But UPS was regularly delivering packages there -- which I found out later from the FBI was a likely indicator of drug trafficking activity. We had a shooting at one of these houses about a quarter of a mile away from my kid's elementary school."

A former practicing lawyer concerned for her family's safety, Fulmer decided to investigate.

"It wasn't until I was able to get down to the courthouse and start looking at deed records and sanitation records and water records that I realized it wasn't just these ... 18 or 20 houses in my neighborhood," Fulmer said.

"It was houses all over the county. And ... I kept seeing the same names in these transactions over and over and over again." Watch Fulmer describe what she found »

Fulmer uncovered a scam known as illegal flipping.

It's carried out by a highly organized and professional team of criminals -- usually including a real estate agent, appraiser, fake buyer, loan officer and settlement agent. Here's how it works:

John Doe, a con artist, buys your house for $200,000 -- but then has the home appraised for $400,000.

Jane Doe, a second buyer, uses a fake identity to get approved for a $400,000 loan. The loan officer approves the loan, and the original owner gets their $200,000 in cash.

John Doe, the second buyer, the loan officer, and the settlement agent split the rest of the money -- $200,000 -- and default on the mortgage.

The home goes into foreclosure and the scammers move on to their next house.

Fulmer describes it as "bank robbery without a gun."

Such a pattern of foreclosures causes property values to go down -- after the inflated appraisals drive property taxes up.

While Fulmer pleaded with law enforcement to act, she quietly investigated these shady deals, which at times she said was "terrifying" because some of the people she suspected were living just down the street from her.

"I was trying to get them arrested. I was trying to get them thrown out of the neighborhood, and I was working with the FBI at that point, and I was terrified that they were going to find out what I was doing," Fulmer said.

And they did. In 2002, federal authorities arrested 15 of the flippers in Fulmer's neighborhood, with some sentenced to 30 years in prison.

"What Ann was able to do was get us, and law enforcement, and people in the neighborhood generally to understand that this was a problem devastating whole neighborhoods, whole communities, and that the real victims were the individuals whose homes where being destroyed in value," said U.S. Attorney Dave Nahmias.

Fulmer now trains FBI agents and lenders with the company Interthinx to recognize mortgage fraud, which costs lenders between $1 billion and $4 billion last year, according to the Mortgage Bankers Association.

To date, Fulmer says she has helped put away more than 300 mortgage fraudsters.

"We tend to think of [mortgage fraud] as a problem more in inner-city neighborhoods, where the property prices are depressed, and in old neighborhoods," Fulmer said.

"But the fact is it happens in those neighborhoods, in middle class suburbia, and all the way up to and including multimillion dollar mansions in gated suburbia." E-mail to a friend