An air loan is a mortgage fraud scheme in which a mortgage broker invents both a property and a borrower in order to earn false profits on completed loan transactions by defrauding lenders. Since the borrower is not real, the broker may set up a system of phony phone numbers 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.

When an air loan inevitably goes into default - which is going to happen since no one is actually paying the mortgage - the lending bank loses everything because the home they would normally hold as collateral to foreclose on does not exist.


Air loans are a type of mortgage fraud that seeks to profit from unsuspecting lenders by an unscrupulous mortgage broker who creates fictitious borrowers and properties, who can never pay off the loan since they do not exist. The broker then keeps the money that was lent.

An air broker involves the creation of a straw borrower (or straw buyer), imaginary loan applicants used by fraud perpetrators to obtain money from loans and are used to disguise the true nature of the bogus transaction. An air loan is thus the loan made to a straw or non-existent buyer on a non-existent property. When the bank tries to foreclose on the property held as collateral after the loan defaults, the lender is stuck since there is no property to dispose of. Air loans are classified as fictitious transactions.

Because lenders today are required by regulators and legal bodies to conduct due diligence on their potential borrowers, this type of fraud is less common today than in the past. Still, clever and ambitious con men are able to construct fictitious borrowers and properties by creating false identities including social security numbers, telephone numbers, mailboxes, email addresses, and so on. They are also able to fabricate land title records, fake ownership documents, and other records to indicate that the false property truly exists. Air loan perpetrarors may also establish false accounts for payments, and maintain custodial accounts for escrows. They may further establish an office with a bank of telephones, each one used as the fake employer, appraiser, credit agency, and so on, to fraudulently deceive creditors who attempt to verify information on loan applications.

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.