Air Loan Law and Legal Definition

”Air loan” is a mortgage fraud scheme in which a mortgage broker invents a property and a borrower in order to earn profits on completed loan transactions by defrauding lenders. The broker may set up a system of phone banks and mailboxes that are used to “verify” the borrower’s employment, home address, and credit history as well as the property’s title history and appraisal value. When an air loan inevitably goes into default, the lending bank loses everything because the home they would normally foreclose on does not exist. The other types of mortgage frauds include property flipping using inflated appraisals, silent second mortgages, straw buyers, foreclosure schemes and equity skimming.