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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.
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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.
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Search results for 'Occupancy Fraud'
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http://www.investopedia.com/articles/mortgages-real-estate/10/how-mortgage-fraud-affects-markets.asp
... Fraud Schemes and Scams The most common investor mortgage fraud schemes are different
types of property flipping, occupancy fraud and the straw buyer scam. ...
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