A national mortgage-fraud scam involving cash-back deals has become a concern in Alaska, FBI investigators said Wednesday.
The scam involves inflated home prices and sometimes kickbacks to those in cahoots, who may include real estate agents, speculative buyers, sellers, appraisers and loan officers.
"Buyers should be aware that this isn't legal," said Colton Seale, an FBI special agent in the Anchorage office's white collar crime division, on Wednesday.
FBI investigators said the scam doesn't just hurt homeowners, who are left with a mortgage that's bigger than the house is worth, making it difficult or impossible for them to sell the home in the future.
It can also create a harmful ripple effect in the real estate market, with real estate agents, buyers and sellers unknowingly relying on inflated home values in an affected neighborhood to determine a house's fair market value.
"It skews the market," Seale said, noting that cash-back deals have been known to involve multiple homes in a subdivision.
The scam is illegal because it involves falsification of loan documents, he said.
"At times, a lack of telling is as bad as lying," said FBI Special Agent Mike Thoreson.
The FBI has been raising similar alerts about various types of loan fraud around the country this year. In March, the bureau pointed out its mortgage fraud investigations have more than doubled in less than five years, to about 1,036 investigations total.
But the alert is another indicator of a seamy corner of the Anchorage area's real estate market, which has been hot for most of this decade.
In Anchorage, recent years have been marked by skyrocketing home values and a steady demand for new homes. In recent months, though, the market has shown signs of cooling.
More Anchorage homes are up for sale than at this time last year and it's taking them longer to sell, according to Multiple Listing Service statistics for Anchorage and Mat-Su.
In a typical cash-back scam, a home has been on the market for a while and a real estate agent or buyer comes forward with an offer to buy a house for tens of thousands of dollars more than its asking price.
As part of the deal, the seller must give back the extra money to the buyer, and an appraiser agrees to deliver an inflated value of the home to the lender. The payment of the extra cash is not disclosed on the loan documents. In almost all cases, the lender doesn't know the home has been overvalued, FBI agents said.
Cash-back deals have been around for years, but the FBI has been dedicating more resources to investigate mortgage fraud and other white collar crime in the past two years, Seale said, explaining that the Sept. 11, 2001, terrorist attacks had siphoned resources away from those investigations for a while.
Pervasive rumors of an ongoing local FBI fraud investigation have sent shivers through the Anchorage real estate community in recent weeks, real estate agents and mortgage lenders said.
"I've heard rumors that there might be indictments at some time," said Art Clark, the Anchorage chapter president for the Alaska Association of Realtors.
Clark said he didn't know very much at all about how cash-back scams work but his association is interested in keeping its members and the public informed about mortgage scams.
Alaska Realtors convicted of a felony would lose their license, he added.
Unlike real estate agents, mortgage lenders and brokers in Alaska are not licensed, but a bill in the Legislature would require licensing and it would also subject lenders to background checks.
The legislation won't solve every problem but it could help take a bite out of mortgage fraud, said Kevin Breeland, president of the Alaska Mortgage Brokers Association.
FBI agents wouldn't confirm Wednesday if they are currently investigating any cash-back deals in Alaska.
They explained they cannot discuss ongoing investigations, but they wanted to raise public awareness of mortgage scams.
Last year the FBI and federal tax agents broke up an Anchorage mortgage fraud ring, although apparently one that wasn't using the cash-back scam.
Seven Anchorage residents, including one on April 20, pleaded guilty to wire fraud in a case that involved using nominal buyers and overstating income on loan applications so the buyers could borrow more money.
Daily News reporter Elizabeth Bluemink can be reached at ebluemink@adn.com or 257-4317.
