Loan Officer Practice Exam 2025 – Comprehensive All-in-One Guide for Exam Success!

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Which type of property is typically involved in an air loan fraud scheme?

Residential

Mixed-use

Commercial

Non-existent

Air loan fraud schemes often involve properties that do not actually exist. In this type of fraud, perpetrators secure financing for a fictional property, convincing lenders to approve loans based on false representations. The term "air loan" refers to these fictitious properties that exist only on paper. Since these loans are secured by non-existent properties, the lenders ultimately suffer the loss when they attempt to recover on a loan that is backed by nothing tangible.

While residential, mixed-use, and commercial properties can be part of legitimate loan transactions, the essence of air loan fraud specifically targets the creation of loans for properties that are made up rather than those that have real physical existence or legal backing. This type of illicit activity exploits the trust within the lending process, emphasizing the need for diligence and verification in real estate transactions.

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