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. Mortgage Broker

    An intermediary who brings mortgage borrowers and mortgage lenders ...
  2. Reverse Mortgage Financial Assessment

    A review of the borrower’s credit history, employment history, ...
  3. 100% Mortgage

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

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

    A type of mortgage in which a homeowner can borrow money against ...
  6. Mortgage

    A debt instrument, secured by the collateral of specified real ...
Related Articles
  1. Personal Finance

    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.
  2. 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.
  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

    Top 6 Mortgage Mistakes

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

    Mortgage Broker vs. Direct Lenders: Which is Best?

    There are key differences between mortgage brokers and direct lenders. Here's how to choose which is best for you.
  6. Retirement

    How Regulations Protect Reverse Mortgage Borrowers

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

    The Reverse Mortgage: A Retirement Tool

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

    Additional Streams of Income for Seniors

    Find out how a reverse mortgage can work in your favor during retirement.
  9. 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.
  10. Retirement

    Reverse Mortgages: The Other Home Loan

    The last chapter discussed the risk of prepaying your mortgage, only to thin out the nest egg you’re counting on in retirement. But what if you’ve already paid down most or all of ...
RELATED FAQS
  1. How does the loan-to-value ratio affect my mortgage payments?

    Understand what the loan to value ratio is, how the ratio is calculated and learn how it has an impact on your mortgage payments ... Read Answer >>
  2. What is the 1003 mortgage application form?

    Learn about the 1003 mortgage application form, what information it requires and why this form is the industry standard for ... Read Answer >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>
Hot Definitions
  1. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  2. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  3. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  4. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  5. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  6. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
Trading Center