Loan Fraud Becomes More Creative as Market Slows: The scammer leaves buyers to deal with mortgages that eventually fall into foreclosure.

WASHINGTON -- Despite being in a down market, the real estate industry is seeing quite a bit of activity these days - illegal activity, that is.

The number of active mortgage fraud cases investigated by the Federal Bureau of Investigations has grew to 818 last year, compared to just 436 three years ago.

"Fraud is an epidemic and increasing," said Ann Fulmer, founder of the Georgia Real Estate Fraud Prevention Awareness Coalition and a vice president of Interthinx, a company specializing in fraud prevention.

Ms. Fulmer expects that with the refinancing boom ending - along with home appreciation - fraud will only become more evident. "Frauds that were committed one to three years ago will eventually resurface," she said.

Today, fraudsters are using a variety of schemes to bring in the big bucks.

"Two of the major mortgage scams are property flipping and chunking," said Rachel Dollar, an attorney in Santa Rosa, Calif., and proprietor of the blog, MortgageFraudBlog.com.

In a property-flipping scheme, a scam artist will purchase a home at a low price, have the house falsely appraised at a higher value, and then quickly resell the property at a huge profit.