A report from CoreLogic warns lenders that people committing mortgage fraud have reversed their traditional approach to one of a common scam: that of claiming they intend to take occupancy of a property in order to obtain a lower interest rate with lower fees and lower down-payment.
Under the new “reverse occupancy scheme”, the prospective home buyers tell lenders they’ll be renting out the home, though their actual intention is to occupy the property as their own home.
Willa Wei, an analyst at CoreLogic, said the buyers are able to claim their “expected” rental income in order to satisfy the debt to income requirement of their mortgage application. The scheme is most common in cities where home prices and rents have appreciated. Leading the way is New York City, which has the highest reverse occupancy risk, followed by Los Angeles, Chicago, Dallas and Houston.
CoreLogic has created a map of the cities that have the highest risk of reverse occupancy fraud. Click on this link to see the map.