Chicago: America's Mortgage Fraud Capital

In tough economic times, mortgage fraud runs rampant -- but in Chicago, it rules.

John and Eloise Smith purchased their home on the South Side of Chicago in the early 1980s for $54,000, and lived there happily for nearly 25 years. But in 2005, circumstances began to change dramatically. They faced personal bankruptcy and a mortgage rescue fraud that stripped the couple of their home equity. Then, Mr. Smith died in 2007. After three years of courtroom fighting and uncertainty, Eloise, 67, lost her home in 2010 and moved in with her daughter.

"It was miserable," says Eloise about the experience. "I didn't know which way to go. I left before the sheriff could throw me out."

The Smiths' experience is far from unusual in the Windy City. The Chicago area is viewed as especially vulnerable to mortgage fraud according to Interthinx, an Agoura Hills, Calif., company that tracks specific types of mortgage risk for the residential mortgage industry. In its 2010 Annual Fraud Risk Report, the company found that "one of the most noteworthy trends of 2010 was the spread and elevation of fraud levels in [Chicago]." Three of the top six and four of the top 20 riskiest zip codes for mortgage fraud in the country were found in the Chicago area.