January 6, 2017
Occupancy fraud occurs when mortgage applicants deliberately misrepresent the intended use of a housing property, in hopes of obtaining more attracting financing terms. For example, applicants might claim property for primary use rather than as an investment, as investment properties can come with lower maximum loan amounts and higher interest rates and fees.
These days, however, a reverse occupancy scheme is in play, in which a low-income applicant intentionally misrepresents occupancy status as an investment. Why? Apparently, the expected rental income can be used as part of the applicant’s assets to satisfy the debt/income requirement on a mortgage application.
CoreLogic indicated that reverse occupancy schemes come with typical characteristics. These include subject properties being sold as investment properties, and purchasers as first-time home buyers with little or no established credit. In addition, the purchasers might report low income, but have significant liquid assets on hand – and they might make large down payments.
For comments, questions or concerns, please contact Amy Sorter