Common Types of Mortgage Fraud

A "straw borrower" is a person whose credit profile is used to secure a mortgage loan for a transaction they do not actually intend to finance for themselves. In this scheme, the real buyer—who typically cannot qualify for a loan due to poor credit—pays someone with good credit to sign the loan documents and pretend to be the owner. The straw borrower usually receives a fee for their participation, but they rarely occupy the home or make the payments. This is considered fraud because the lender is tricked into assessing the risk based on the straw buyer's strong financial history rather than the actual user of the property, who is a much higher risk.