What is an Air Loan?

An air loan is a type of mortgage fraud that occurs in the financial world. Through an air loan, mortgage brokers defraud or extract money unlawfully from lenders. In this type of loan, a fictitious (unreal) buyer and fake property are invented by a broker to earn profit from the unsuspecting lender. Since the broker makes up both the property and the buyer, an air loan is characterized by default, given that there is no borrower paying back the mortgage. An air loan is an unacceptable practice because it seeks to defraud a lender. Both the borrower and the property in this loan are fake, leaving the lender in a heavy loss.

Back to:BANKING, LENDING, & CREDIT INDUSTRY

How Does an Air Loan Work?

Air Loans are fictitious transactions used by fraudsters (usually mortgage brokers) to milk profits from lenders. The process of this loan is an elaborate one as the broker tries to conceal all facts from the lender until the transaction is completed. Given that many lenders go through a long process of ensuring that a borrower has provided actual details and that the property used as collateral belongs to the borrower and is real, ambitious brokers who perpetrate air loans also go through these processes. This ranges from creating a fake home address, phone number and other documents for a fictitious buyer or borrower. However, brokers also ensure that the phone numbers and email addresses provided are verifiable by the lender, in order to cover their trail. Other details of a fictitious borrower that the broker provides are credit history, social security number, the title of a property, appraisal of the property and others. In some cases, in order to convince a lender further, brokers provide the details of the employer of the fictitious borrower, the credit agency and other convincing documents.

Air Loans vs. Other Fraud Schemes

Just like any other type of fraud scheme, an air loan is perpetrated to defraud an unsuspecting lender. The aim is to make profits from a completed loan, which is left to go into default since the borrower and the property used as collateral are fake. Other types of fraud schemes in the mortgage and financial world include; silent second mortgages, equity scheming, straw buyers, foreclosure schemes, and others. In recent times, air loans and other forms of fraud schemes are less common because lenders now conduct more thorough diligence, with the help of legal professionals.