Definition of air loan

What is an air loan?

An air loan is a type of mortgage fraud who seeks to take advantage of unsuspecting lenders. A mortgage broker invents both a property and a borrower in order to earn bogus profits on completed loan transactions. When the loan inevitably goes into default – which will happen, because no one is actually paying the mortgage – the lending bank loses everything because the house it would normally hold as collateral to be foreclosed on does not exist. Airline loans are classified as fictitious transactions.

How an air loan works

An air loan involves the creation of a straw borrower (or straw buyer) by a clever and ambitious fraudster. As the borrower is not real, the broker must set up a system of fake telephone numbers and mailboxes which are used to “verify” a false identity through employment records, the address of the borrower. home, credit history, social security number, etc. The broker must also convince of the history of the property title and appraisal value, fabricating land title records, fake property documents and other documents to indicate that the fake property exists.

Airline loan originators can also set up fake accounts for payments and maintain deposit accounts for escrows. They can further establish an office with a bank of phones, each used as a bogus employer, appraiser, credit bureau, etc., to fraudulently deceive creditors who attempt to verify information on loan applications.

Airline loans versus other fraudulent schemes

As regulators and legal bodies today require lenders to perform due diligence on potential borrowers, overhead lending is less common than in the past. However, this is only one type of mortgage fraud. Others include flipping property using inflated appraisals, silent second mortgages, straw buyers, foreclosure and equity plans. skimming.