What Is an Air Loan?
An air loan is a type of mortgage fraud that looks to profit from clueless lenders. A mortgage broker designs both a property and a borrower to earn false profits on completed loan transactions. At the point when the loan definitely goes into default — which will occur, as nobody is really paying the mortgage — the lending bank loses everything on the grounds that the home it would regularly hold as collateral on which to abandon doesn't exist. Air loans are classified as fictitious transactions.
How an Air Loan Works
An air loan includes the creation of a straw borrower (or straw buyer) by a smart and aggressive fraudster. As the borrower isn't real, the broker must set up a system of fake telephone numbers and letter drops that are utilized to "confirm" a false identity through employment records, personal residence, credit history, Social Security number, etc. The broker must likewise persuade with respect to the property's title history and appraisal value, manufacturing land title records, fake ownership reports, and different records to demonstrate that the false property exists.
Air loan culprits may likewise lay out false accounts for payments and keep up with custodial accounts for escrows. They might additionally lay out an office with a bank of phones, every one utilized as the fake employer, appraiser, credit agency, etc, to fraudulently beguile creditors who endeavor to confirm data on loan applications.
An air loan is a fraud scheme in which a mortgage broker imagines both a property and a borrower to earn false profits.
Air Loans versus Other Fraud Schemes
Since lenders today are required by regulators and legal bodies to conduct due diligence on their expected borrowers, air loans are more uncommon than in the past. They are, in any case, just one type of mortgage fraud. Others incorporate property flipping utilizing expanded appraisals, silent second mortgages, straw buyers, foreclosure schemes, and equity skimming.