Occupancy Fraud

AAA

DEFINITION of 'Occupancy Fraud'

A type of mortgage fraud, whereby the borrower lies about whether or not the home will be owner occupied. Occupancy fraud happens when the borrower says that a home will be owner occupied, when in reality it will not be. Mortgage lenders typically offer lower rates to mortgages on owner-occupied homes, rather than investment properties. When occupancy fraud occurs, banks take on too much risk because they are receiving a lower interest rate than they should be for the delinquency risk that exists.

INVESTOPEDIA EXPLAINS 'Occupancy Fraud'

Lenders typically charge higher rates on mortgages for non-owner occupied homes, because of higher delinquency rates. Delinquency rates are often lower for the owner-occupied home because people do not want to lose their private residence and become homeless. There is a lot less attached to losing an investment property.

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Appraisal Fraud

    A form of mortgage fraud, whereby the value of a home is deliberately ...
  3. Fixed-Rate Mortgage

    A mortgage that has a fixed interest rate for the entire term ...
  4. Mortgage Suitability

    A standard to which mortgage lenders can adhere when directing ...
  5. Housing Unit

    One of a house, apartment, mobile home, group of rooms or single ...
  6. Variable Interest Rate

    An interest rate on a loan or security that fluctuates over time, ...
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. What are the main factors that impact share prices in the insurance sector?

    The main factors that impact share prices in the insurance sector are interest rates, earnings and actuarial risk. In the ... Read Full Answer >>
  3. Why do insurance policies have deductibles?

    Insurance policies have deductibles for behavioral and financial reasons. Moral Hazards Deductibles mitigate the behavioral ... Read Full Answer >>
  4. Which emerging markets are seeing the strongest growth in the insurance sector?

    The emerging market economies seeing the strongest growth for the insurance sector are primarily the main emerging market ... Read Full Answer >>
  5. 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 >>
  6. 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 >>
Related Articles
  1. Home & Auto

    To Rent Or Buy? The Financial Issues

    Thinking of buying a home? We look at the initial and ongoing costs, as well as the so-called benefits.
  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. Taxes

    Avoid Capital Gains Tax On Your Home Sale

    If you have property to sell and want to avoid capital gains tax, a Section 1031 exchange may be the answer.
  5. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  6. Home & Auto

    5 Things Every Real Estate Pro Knows

    Find out how to stop chasing the market and start leading it.
  7. Home & Auto

    Exploring Real Estate Investments

    Discover how owning properties can give you a roof over your head or a check in your pocket.
  8. 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.
  9. 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.
  10. 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.

You May Also Like

Hot Definitions
  1. Xetra

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

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

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
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!