A new mortgage fraud scheme is taking a reverse approach to traditional occupancy scams. In the past, prospective investors have claimed they intend to take owner occupancy. Then, they are able to qualify for a better interest rate, lower fees, a smaller down payment, or higher loan amount than if they applied for a mortgage as an investor.
But CoreLogic analyst Willa Wei is sounding the alarm on the growing incidence of a “reverse occupancy scheme,” in which home buyers claim they’ll be renting out the home even though they actually intend to occupy it as their home.
Wei says by doing so fraudsters can then claim “expected” rental income in satisfying the mortgage application debt/income requirement.
The cities seeing the highest cases of reverse occupancy schemes tend to be in areas where both home prices and rents have appreciated at the fastest rates.
CoreLogic pinpointed New York City as having the highest reverse occupancy risk than any other metro. Los Angeles, Chicago, Dallas, and Houston are also considered among the highest risk, but “New York is a hot spot considering both percentage and volume,” CoreLogic notes.
Combating mortgage fraud continues to prove challenging for lenders, says Wei. Fraud “morphs from one scheme to another depending on changing local economic and real estate market conditions and government programs,” Wei says.
Visit CoreLogic to view a heat map
of the cities that may have the most elevated risk for reverse occupancy fraud.
Source: “There Is a Comeback of Occupancy Fraud … In Reverse,” CoreLogic Insights blog (Dec. 15, 2017)