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. Appraiser

    A practitioner who has the knowledge and expertise necessary ...
  6. Mortgage Broker

    An intermediary who brings mortgage borrowers and mortgage lenders ...
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. Professionals

    Is Your Financial Advisor Looking Out for You?

    Financial advisors sometimes aren't looking out for clients' best interests. Regulators are scrutinizing their practices; investors should too.
  5. Professionals

    Are You Sure You Aren't Ponzi Scheme-Susceptible?

    Anyone can be a victim of a Ponzi scheme — even the most financially literate. Here's how to avoid the next Madoff.
  6. Professionals

    7 Cybersecurity Tips for Advisors

    The digital age has created a new breed of thief who can break into client files at any time, but there are ways to minimize risk exposure.
  7. Professionals

    Tips for Protecting Clients from Scammers

    Predators now have more access to vulnerable clients than ever before; advisors should communicate with clients to better spot potential scams.
  8. Investing News

    Why FIFA Can't Give the 2022 World Cup to Qatar

    Learn about the high price tag for the 2022 World Cup in Qatar, along with allegations of human rights abuses and bribery scandals in the bidding process.
  9. Investing Basics

    Explaining Insider Trading

    While often associated with illegal activity, insider trading actually encompasses both illegal and legal trading of securities.
  10. Economics

    Understanding Money Laundering

    The process of creating the appearance that large amounts of money obtained from serious crimes actually originated from a legitimate source.
RELATED FAQS
  1. What are some high-profile examples of wash trading schemes?

    In 2012, the Royal Bank of Canada (RBC) was accused of a complex wash trading scheme to profit from a Canadian tax provision, ... Read Full Answer >>
  2. How should a whistleblower report unlawful or unethical behavior?

    Whistleblowing takes many forms. A whistleblower could expose government corruption, expose unethical business behavior or ... Read Full Answer >>
  3. How do insurance companies use a whistleblower?

    Fraudulent claims are among the most prevalent and serious business risks that insurance companies face. Many consumers have ... Read Full Answer >>
  4. What are examples of inherent risk?

    Inherent risk is the risk imposed by complex transactions that require significant estimation in assessing the impact on ... Read Full Answer >>
  5. What is the difference between wash trading and insider trading?

    Wash trading is an illegal trading activity that artificially pumps up trading volume in a stock without the stock ever changing ... Read Full Answer >>
  6. What were the primary financial crimes involved in the ZZZZ Best case?

    ZZZZ Best was a company started by Barry Jay Minkow that claimed to be a carpet cleaning business. In fact, it was a Ponzi ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Dog And Pony Show

    A colloquial term that generally refers to a presentation or seminar to market new products or services to potential buyers.
  2. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  3. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  4. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  5. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  6. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!