Income Fraud Law and Legal Definition
Income fraud is committed when a borrower overstates his/her income in a mortgage loan application for the purpose of qualifying for a mortgage or for a larger loan amount. It is considered fraud because in most cases the borrower would not be qualified for the loan if the true income was disclosed. Income fraud is generally associated with mortgage loans where the borrower or the loan officer acting for such borrower will state an income that is required to get qualified for a loan without any verification. Since mortgage lenders have tightened the standards for approving a loan, income fraud is increasingly seen in traditional full-documentation loans where the borrower forges or alters their tax returns and bank account records to provide support for the inflated income.