Air Loan

AAA

DEFINITION of 'Air Loan'

A mortgage fraud scheme in which a mortgage broker invents a property and a borrower in order to earn profits on completed loan transactions by defrauding lenders. Since the borrower is not real, the broker may set up a system of phone banks and mailboxes that are used to "verify" the borrower's employment, home address, credit history, and so on as well as the property's title history and appraisal value.

INVESTOPEDIA EXPLAINS 'Air Loan'

When an air loan inevitably goes into default - since no one is paying the mortgage - the lending bank loses everything because the home they would normally foreclose on does not exist.


The air loan is just one type of mortgage fraud. Others include property flipping using inflated appraisals, silent second mortgages, straw buyers, foreclosure schemes and equity skimming.

RELATED TERMS
  1. In Escrow

    An item such as money or a piece of property that has been transferred ...
  2. Flipping

    A type of real estate investment strategy in which an investor ...
  3. Identity Theft

    The crime of obtaining the personal or financial information ...
  4. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  5. Mortgage Broker

    An intermediary who brings mortgage borrowers and mortgage lenders ...
  6. Appraiser

    A practitioner who has the knowledge and expertise necessary ...
Related Articles
  1. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  2. Budgeting

    Mortgages: How Much Can You Afford?

    Answering this means number-crunching as well as factoring in other considerations and expenses.
  3. Home & Auto

    Mortgage Fraud: Understanding And Avoiding It

    There are many different ways to be victimized through home ownership - learn how to identify and avoid these crimes.
  4. Economics

    America's Most Notorious Corporate Criminals

    Learn about the crimes and punishments of some of the most infamous convicted white-collar crooks.
  5. Investing News

    Educating Your Clients About Cybersecurity

    Financial advisors must lead the charge against cybersecurity risks, for their clients and for their own practices.
  6. Credit & Loans

    Are You A Target For Identity Thieves?

    The Americans at highest risk for identity theft and identity fraud aren't the ones you most expect. See if you're on the high-risk list.
  7. Credit & Loans

    Avoid Becoming An Identity Thief's Next Victim

    Use these 7 techniques to keep yourself under the radar and out of the way of identity thieves.
  8. Investing News

    How The Patriot Act Works & Why Is It Important

    The USA Patriot Act gave the government more muscle to fight financial crime after the Sept. 11 terrorist attacks. Here's an overview.
  9. Personal Finance

    Consumer Protection Laws You Need To Know

    Knowing these which consumer protection law can help you in particular situations can save you time, money and stress.
  10. Insurance

    Credit Scams To Watch Out For

    More than 30 million people were victims of fraud in 2007. Will you be next?

You May Also Like

Hot Definitions
  1. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  2. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  3. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  4. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  5. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  6. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
Trading Center