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Occupancy Fraud

Source: Investopedia
This Article has been Edited for Accessibility

Occupancy Fraud

What is '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.

Explaining '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.


Additional Resources

  1. Liar's Loans, Mortgage Fraud, And The Great ... [umass.edu]
  2. The Review Of Economics And Statistics [www0.gsb.columbia.edu]
  3. Housing Bubble And Fraud [fisher.osu.edu]
  4. Download [scholarship.law.nd.edu]
  5. Liar's Loan? Effects Of Origination Channel And Information ... [economics.indiana.edu]
  6. Profits Before People [polisci.ucsd.edu]