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. Housing Unit

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

    An interest rate on a loan or security that fluctuates over time, ...
  5. Mortgage Suitability

    A standard to which mortgage lenders can adhere when directing ...
  6. Fixed-Rate Mortgage

    A mortgage that has a fixed interest rate for the entire term ...
Related Articles
  1. To Rent Or Buy? The Financial Issues
    Home & Auto

    To Rent Or Buy? The Financial Issues

  2. Mortgages: How Much Can You Afford?
    Budgeting

    Mortgages: How Much Can You Afford?

  3. Mortgage Fraud: Understanding And Avoiding ...
    Home & Auto

    Mortgage Fraud: Understanding And Avoiding ...

  4. Avoid Capital Gains Tax On Your Home ...
    Taxes

    Avoid Capital Gains Tax On Your Home ...

comments powered by Disqus
Hot Definitions
  1. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  2. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  3. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  4. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  5. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  6. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
Trading Center