DENVER—Colorado regulators say they have uncovered a mortgage fraud scheme that resulted $8 million in kickbacks to buyers and brokers in 105 home sales.
“It’s certainly the biggest case we have ever investigated,” said Zachary Urban, a spokesman for the Colorado Division of Real Estate.
Urban said 88 of the homes wound up in foreclosure, but “we can’t say that all were as a result of this type of transaction.”
About a dozen real estate agents have received sanctions ranging from mandatory classes to revocation of their licenses, and fines of $250 to $50,000.
Division of Real Estate Director Erin Toll said results of the investigation have been turned over to the FBI, the IRS and other federal agencies.
Spokeswomen for the FBI and IRS in Colorado told The Associated Press Tuesday their agencies do not confirm or deny the existence of investigations.
The state investigation was reported Tuesday by the Rocky Mountain News.
Authorities said the scheme was based on inflated appraisals that were used to secure big home loans.
At closing, some of the borrowed money was paid to a third party—either an individual or a company—with the understanding it would be used to improve the home. Instead, authorities said, the third party gave the money to the buyer without the knowledge of the lender.
The third party sometimes kept a cut of the money, authorities said.
Deliberately inflating the value of a home is illegal, as is giving part of a loan to the buyer without the lender’s knowledge, Urban said.
Urban said at least two appraisers are under investigation in connection with the alleged scheme.
The sales took place in 2006 and involved homes along the Front Range from Greeley to Castle Rock.
