Straw borrower
Encyclopedia
A straw borrower is a United States
term for an individual whose name, social security number
, and credit history
are used to hide the identity of the organizers of a for-profit mortgage fraud
scheme.
Straw buyers are also used in order to obtain a residential mortgage
for a person who would not qualify for the loan, frequently a family member or friend. In for profit schemes, the straw buyer is usually compensated by the organizer for the use of his financial identity. While the straw borrower may have been lured into the transaction with the promise that he would not be liable for the mortgage payments, the straw is legally bound once the mortgage is obtained and will be responsible for making the payments. If the mortgage goes into default or is foreclosed
, it will be reported under the straw borrower's name and his credit will be ruined. Misrepresentation of identity on a federally related mortgage transaction is a criminal offense punishable by up to 30 years imprisonment.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
term for an individual whose name, social security number
Social Security number
In the United States, a Social Security number is a nine-digit number issued to U.S. citizens, permanent residents, and temporary residents under section 205 of the Social Security Act, codified as . The number is issued to an individual by the Social Security Administration, an independent...
, and credit history
Credit history
Credit history or credit report is, in many countries, a record of an individual's or company's past borrowing and repaying, including information about late payments and bankruptcy...
are used to hide the identity of the organizers of a for-profit mortgage fraud
Mortgage fraud
Mortgage fraud is crime in which the intent is to materially misrepresent or omit information on a mortgage loan application to obtain a loan or to obtain a larger loan than would have been obtained had the lender or borrower known the truth....
scheme.
Straw buyers are also used in order to obtain a residential mortgage
Mortgage loan
A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan...
for a person who would not qualify for the loan, frequently a family member or friend. In for profit schemes, the straw buyer is usually compensated by the organizer for the use of his financial identity. While the straw borrower may have been lured into the transaction with the promise that he would not be liable for the mortgage payments, the straw is legally bound once the mortgage is obtained and will be responsible for making the payments. If the mortgage goes into default or is foreclosed
Foreclosure
Foreclosure is the legal process by which a mortgage lender , or other lien holder, obtains a termination of a mortgage borrower 's equitable right of redemption, either by court order or by operation of law...
, it will be reported under the straw borrower's name and his credit will be ruined. Misrepresentation of identity on a federally related mortgage transaction is a criminal offense punishable by up to 30 years imprisonment.