Have you ever heard the term "Straw Buyer"? You may be envisioning the Scarecrow from the Wizard of Oz...I know that's what comes to my mind, but a Straw Buyer is actually a common mortgage fraud scheme, involved in "Fraud for Property"
So, what exactly is a straw buyer? Well, a straw buyer is basically an individual who's personal information such as employment and credit is used as a "cover" for a transaction. It's possible that the straw buyer may be a victim of identity theft OR a willing participant to the transaction. There are cases where a straw buyer is not even a real person in that they only exist on paper.
In this type of fraud scheme, this often involves a party who "borrows" the identity of a friend or family member in order to receive a home loan. It's possible that the individual may or may not receive some sort of financial compensation for their part in the scheme.
So how are straw buyers spotted? There are a number of red flags that may be identified within a loan file that may indicate a straw buyer is being used. Here are a few:
Investment property is represented as Owner-occupied
Someone signed on the borrower's behalf
Names were added to the purchase contract
The sale of the property involves a relative or related party
No sales agent is involved
A quit claim deed is used either right before, or soon after, the loan closing.
While none of these red flags necessarily prove that fraud is being committed, it does warrant further investigation and consideration on behalf of the underwriter and lender.
Check out this additional information as it pertains to Mortgage Fraud.