Air Loan

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.

BREAKING DOWN '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. Reverse Mortgage Financial Assessment

    A review of the borrower’s credit history, employment history, ...
  2. 100% Mortgage

    A mortgage loan in which the borrower receives a loan amount ...
  3. Home Mortgage

    A loan given by a bank, mortgage company or other financial institution ...
  4. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  5. No-Cost Mortgage

    A mortgage refinancing situation in which the lender pays the ...
  6. Open-End Mortgage

    A type of mortgage that allows the borrower to increase the amount ...
Related Articles
  1. Retirement

    Guidelines for FHA Reverse Mortgages

    FHA guidelines protect borrowers from major mistakes, prevent lenders from taking advantage of borrowers and encourage lenders to offer reverse mortgages.
  2. Personal Finance

    Homebuyers' Walkthrough: Obtaining A Mortgage

    A mortgage is a pledge of real property as security for the payment of money, and today's homebuyers have a variety of options in terms of lenders and loan types. Obtaining a mortgage can be ...
  3. Personal Finance

    What Is A Mortgage?

    A mortgage is a loan used to purchase a home, where the property serves as the borrower's collateral.
  4. Personal Finance

    Financing Basics For First-Time Homebuyers

    If you're looking to get your first mortgage, there are many financing options available.
  5. Personal Finance

    Top 6 Mortgage Mistakes

    These common errors could end in foreclosure.
  6. Personal Finance

    Homeowners, Beware These Scams!

    If you're in a pinch for money, you're the prime target for con artists and thieves.
  7. Retirement

    How Regulations Protect Reverse Mortgage Borrowers

    They're complex animals, which is why there are government guidelines in place to protect borrowers.
  8. Retirement

    The Reverse Mortgage: A Retirement Tool

    Discover another way to fund your retirement without having to make payments on a loan.
  9. Retirement

    Additional Streams of Income for Seniors

    Find out how a reverse mortgage can work in your favor during retirement.
  10. Financial Advisor

    Reverse Mortgages: Right for Clients? Not Often

    Reverse mortgages are a legitimate vehicle for folks age 62 and up to tap into the equity in their homes for other uses. Here's what to consider with them.
RELATED FAQS
  1. What’s the difference between a mortgage lender and a mortgage servicer?

    Buying a home is an exciting and confusing process. Once the loan is secured, it's important to know who gets the payment: ... Read Answer >>
  2. What are the requirements to apply for a reverse mortgage loan?

    For homeowners of a certain age who wish to stay in their homes but are finding it costly, a reverse mortgage could be the ... Read Answer >>
  3. Why does the loan-to-value ratio matter?

    Learn how the loan-to-value (LTV) ratio is calculated, and why this metric is important to lenders when evaluating a home ... Read Answer >>
  4. What is the difference between a PMI (primary mortgage insurance) loan and a Federal ...

    Understand the difference between a conventional mortgage that requires primary mortgage insurance and a Federal Housing ... Read Answer >>
  5. What is PMI, and does everyone need to pay it?

    Also known as "Primary Mortgage Insurance," PMI is the lenders (banks) protection in the event that you default on your primary ... Read Answer >>
  6. What are the different types of subprime mortgages?

    Clarify your understanding of subprime mortgages. Learn about the different types, how they work and when they might be beneficial. Read Answer >>
Hot Definitions
  1. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  3. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  4. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  5. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  6. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
Trading Center