Does a lender think you’re to blame for an air loan it wrote?

On Behalf of | Apr 26, 2021 | White Collar Crimes |

Mortgage and real estate fraud comes in many forms. People who want to buy a house might misrepresent their circumstances so that they can qualify for a loan. Brokers at a company might intentionally hire an appraiser that they know will give an inflated value to a property so that they can finance a bigger sale and collect a bigger commission.

Mortgage companies can lose millions of dollars to fraudulent activity. They lose money when they pay more for a property than it’s worth. They lose money when someone defaults on a mortgage because they didn’t have enough income to make the payments. They also lose money when someone applied for and received an air loan.

What is an air loan?

As you might be able to guess from the name, an air loan is a mortgage secured by nothing but thin air. It involves fraud on the part of an applicant, a broker or a real estate professional. By tricking people involved in the process, someone seeking an air loan can potentially get a mortgage on a property that doesn’t exist.

Everything looks good on paper, except that the property isn’t real. Once the lender completes the wire transfer of the money to buy the house, recovery of those funds is almost impossible. Someone could stop making payments and disappear with tens or even hundreds of thousands of dollars that the bank has no way to recoup because there is no collateral property involved.

Who gets implicated in an air loan?

When a lender discovers an air loan, they have few options for handling the financial loss. Often, the only way to handle an air loan is to figure out who played a role in it and hold them accountable.

Loan officers and underwriters who failed to notice problems with an application or who covered up omissions buy a client could face termination from their position and possibly mortgage fraud charges.

Appraisers or inspectors who failed to notice the issue or who turned in documentation without visiting the property could similarly find themselves facing criminal charges and professional repercussions. If the lending institution successfully tracks down the person responsible for applying for the loan, that individual may also face mortgage fraud charges. Such charges could lead to severe penalties, including restitution obligations and even jail time.

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