United States
Hong KongMortgage fraud: for housing or for profit
Fraud for housing is committed to obtain a home to live in, usually by overstating income or assets. Fraud for profit is committed to extract money from the transaction, through straw buyers, inflated appraisals and flipping schemes.
Two categories, and the exam asks you to place a scenario in one of them.
Fraud for housing
The borrower wants the house and lies to get it. Overstated income, undisclosed debts, borrowed down payment funds presented as savings, a misrepresented employment position.
The intention is to live there and pay. That does not make it lawful, and it is still fraud.
Fraud for profit
Somebody is extracting money from the transaction itself, usually with more than one participant.
- A straw buyer applying on behalf of a hidden principal
- An inflated appraisal to support a loan larger than the property is worth
- Property flipping at artificially escalating prices
- Silent second liens concealed from the first lender
- Fabricated employers and fabricated documentation
Telling a lender a property will be owner-occupied when it will be rented. Borrowers treat it as a small lie because the rate difference feels arbitrary. It is mortgage fraud, and it appears in questions more often than any other example.
What an originator must do
Not participate, and report suspicion.
A suspicious activity report must be filed within 30 calendar days of initial detection, and the subject may not be told. Not a hint, not a warning, not a suggestion they withdraw.
Red flags
Documents that look altered, a borrower unfamiliar with their own stated employer, a deposit that appears from nowhere, pressure to close unusually fast, a value that does not fit the neighbourhood.
One flag is a question. Several together is a pattern.
Common questions
What is fraud for housing?
Misrepresentation committed to obtain a home to live in, such as overstating income or concealing debts.
What is fraud for profit?
Misrepresentation committed to extract money from the transaction, through straw buyers, inflated appraisals or flipping schemes.
Is occupancy misrepresentation fraud?
Yes. Telling a lender a property will be owner-occupied when it will be rented is mortgage fraud.
What must an originator do on suspicion?
File a suspicious activity report within 30 calendar days of initial detection, and never tell the subject.
What is a straw buyer?
Someone applying for credit on behalf of a hidden principal who is the real beneficiary.