What Is An Air Loan


How Does an Air Loan Work?

Fraudsters (typically mortgage brokers) utilize fake transactions called “Air Loans” to deceive lenders and profit from them. This loan has a complicated process because the broker is trying to hide any information from the lender until the deal is finalized. Ambitious brokers who commit air loan fraud also go through these procedures because many lenders go through a lengthy process to verify that a borrower has provided accurate information and that the property used as collateral belongs to the borrower and is real. This includes making up a phone number, home address, and other details for a phony borrower or buyer. To cover their tracks, brokers do, however, also make sure that the email addresses and phone numbers supplied can be verified by the lender. The broker also gives credit history, social security number, property title, property appraisal, and other information about a fictitious borrower. Brokers sometimes provide information about the fictitious borrower’s employer, the credit agency, and other persuasive documents to persuade a lender.

Air Loans vs. Other Fraud Schemes

An air loan is a fraud scheme, just like any other, intended to trick an unwary lender. The intention is to profit from a loan that has been completed but is allowed to default because the borrower and the collateral property are fraudulent. Other mortgage and financial fraud schemes include straw buyers, equity scheming, silent second mortgages, foreclosure schemes, and others. Due to increased diligence by lenders and the assistance of legal experts, fraud schemes involving air loans and other types of credit have become less prevalent in recent years.


What is considered an air loan?

A loan to a straw buyer or nonexistent buyer on a nonexistent property is known as an air loan. A real estate agent is not involved (fictitious transaction); straw buyers are usually involved in air loans (see the “Straw Buyer Characteristics” section); an entity other than the borrower makes the mortgage payments.

What does air stand for mortgage?

The Home Valuation Code of Conduct is to be replaced by a set of guidelines known as Appraiser Independence Requirements (AIR) (HVCC) The major goal was to uphold the HVCC’s original intent while carrying on enhancing security for lenders, real estate brokers, mortgage investors, homeowners, and the housing sector as a whole.

What does air stand for in loans?

Assumed Interest Rate (AIR): Definition, Mechanism, and Illustration By. Julia Kagan. Julia Kagan is a consumer and financial journalist who formerly served as Investopedia’s senior editor for personal finance. Learn about our editorial policies.

Is it legal to flip a loan?

The following are examples of predatory lending practices that are expressly forbidden by law: charging exorbitant fees; packing—the practice of selling additional products to borrowers without their knowledge or consent; and flipping—the practice of frequently making new loans to refinance existing loans.

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