Mortgage Fraud Prevention and Risk Management Flashcards

A loan is funded on a property that does not exist, using a fictitious borrower. This is known as a(n):

Answer: Air loan

An air loan is a loan made on a nonexistent property or borrower.

A seller secretly funds the buyer's down payment through an undisclosed second lien that the first-lien lender never learns about. This is called a:

Answer: Silent second

A silent second is undisclosed subordinate financing that hides the borrower's true equity stake.

A borrower overstates income to qualify for a home they intend to live in and want to keep. Which category does this fall into?

Answer: Fraud for housing

Fraud for housing involves borrower misrepresentation to obtain a residence, not to make illicit profit.

Knowingly making false statements to influence a federally insured lender's loan decision can carry up to what maximum federal penalty under 18 U.S.C. 1014?

Answer: 30 years and $1,000,000

18 U.S.C. 1014 allows up to 30 years in prison and a $1 million fine.

What is the best practice for verifying a borrower's employment when a paystub looks suspicious?

Answer: Contact the employer using independently sourced contact information

Independently sourced contact details prevent fraudsters from routing verification to accomplices.

A lender manager pressures an appraiser to reach a specific value so the loan can close. This violates requirements for:

Answer: Appraiser independence

Federal law prohibits coercing or influencing appraisers, preserving appraisal independence.

Which IRS form allows a lender to obtain tax return transcripts directly from the IRS to validate borrower income?

Answer: Form 4506-C

Form 4506-C authorizes the IRS to provide transcripts to verify income documents.