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Nervous Nellie builders who are sitting on unsold inventories could be the next target of crafty con men looking to defraud lenders, says a Georgia prosecutor. Ditto for worried home owners who can't sell their ranches, at least not for the price they need.

But whoever plays along could wind up in jail.

Mortgage fraud is conservatively estimated by the FBI as a $1.2 billion a year "business," perhaps even the new favorite among drug traffickers and career felons who can make millions without worrying that a rival mobster will put a gun to their heads or a cop will push their faces into the sidewalk.

But David McLaughlin, an assistant attorney general in Atlanta, thinks the worst is yet to come. With the number of unsold houses building every day, he says its only a matter of time before fraudsters turn their attention to sellers, including builders. The scam he sees works like this:

A builder has finished several houses but been unable to sell them. He's getting anxious because not only have sales slowed but prices are starting to decline when he's approached by a buyer who proposes a happy outcome. Not only will the buyer take the houses off the builder's hands, he'll pay $100,000 more per house than the builder is asking. All the builder has to do is kickback the extra hundred grand to the buyer after closing.

Bite, according to McLaughlin, who says his goal is to put people in prison, and you're an accomplice to a felony, at least in the Peach State. "If you are kicking back money, that is an omission made with intent to defraud," he says.

Georgia has already arrested several builders on racketeering charges. In the latest case, Brian Dupree was charged along with nearly two dozen others with selling as many as 100 houses in the Milford Hills subdivision in Athens-Clarke County at inflated prices. Dupree, the alleged ring leader, is said to have built houses "all over the state."

According to the arrest warrants, the supposed co-conspirators "had a part in this systematic, fraudulent inflating of property values in Milford Hills, obtaining fraudulent appraisals and loan applications."

The case is an example of a new "get tough" attitude in the mortgage community as well as among law enforcement officials at all levels. The Dupree gang was turned in by a lender who was asked to fund the fake sales. Georgia is the only state which has codified the act of mortgage fraud as a crime, punishable by up to 20 years in prison, but at least five others -- New Jersey, Utah, Colorado, Oklahoma and California -- are considering similar legislation.

At the federal level, meanwhile, the FBI is urging lenders to file reports of suspicious activities, even if they are not required to do so by law, in hopes of building a data base so they can stay at least one step behind the criminals. However, it is currently going after only the worst offenders, those who perpetrate schemes involving multiple houses.

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