Air Loan

Cite this article as:"Air Loan," in The Business Professor, updated April 16, 2020, last accessed August 11, 2020, https://thebusinessprofessor.com/lesson/what-is-an-air-loan/.

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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.

A Little More on What is an Air Loan

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.

Reference for “Air Loan”

https://www.investopedia.com › Insights › Crime & Fraud

https://definitions.uslegal.com/a/air-loan/

www.fcscfg.com/index.php/terminology/air-loan

https://en.wiktionary.org/wiki/air_loan

https://www.finweb.com/mortgage/definition-of-an-air-loan.html

Academics research on “Air Loan”

Mortgage fraud: A risk factor analysis of affected communities, Carswell, A. T., & Bachtel, D. C. (2009). Mortgage fraud: A risk factor analysis of affected communities. Crime, law and social change, 52(4), 347-364. Mortgage fraud is a fast-growing form of white-collar crime that has received much press coverage in the United States of America. Mortgage fraud has an adverse effect on individual homeowners, communities, and many indirect victims of the crime. While past research has focused on the personal motivating factors behind the commission of white-collar crime, this particular article reviews several facets of the crime itself and explores the potential neighbourhood risk factors that help attract the crime. From a national perspective, mortgage fraud seems to occur more frequently in neighbourhoods that have low socioeconomic indicators. These associations become even more pronounced when the degree of fraud occurrences within the community is factored in as a variable. Upon disaggregating the data according to region, the fraud indicator variables also display differing trend levels, perhaps indicating that as mortgage fraud practices begin to mature within an area, its community dynamics tend to change as well. The article concludes with recommendations for policymakers, community organizations, and law enforcement officials as to how to address mortgage fraud once it appears within a community, and also addresses future avenues of research for what is largely an untapped area of financial crime research.

The structural causes of mortgage fraud, Smith, J. C. (2009). The structural causes of mortgage fraud. Syracuse L. Rev., 60, 473.

Mortgage fraud and organized crime in Canada: strategic intelligence brief, von Lampe, K. (2008). Mortgage fraud and organized crime in Canada: strategic intelligence brief. Trends in Organized Crime, 11(3), 301-308.

Mortgage fraud and organized crime in Canada: strategic intelligence brief, von Lampe, K. (2008). Mortgage fraud and organized crime in Canada: strategic intelligence brief. Trends in Organized Crime, 11(3), 301-308.

And some with a fountain pen: The securitization of mortgage fraud, Barnett, H. C. (2009). And some with a fountain pen: The securitization of mortgage fraud

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