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

The correct choice highlights a type of loan known as "air" loans, which are a specific form of mortgage fraud. An air loan involves fictitious properties and buyers; essentially, the details provided for these loans are completely fabricated. This fraudulent activity typically entails creating false documentation to secure financing on properties that do not exist, allowing the perpetrator to siphon off funds from the loan for their benefit.

Understanding the nature of air loans is important for recognizing how fraud can manifest within mortgage lending. They are distinct from other types of loans such as silent second, subprime, and conventional loans, each of which has legitimate purposes in the mortgage industry. Silent seconds refer to secondary mortgages that are not disclosed to the primary lender. Subprime loans are offered to borrowers with less-than-ideal credit, while conventional loans follow standard mortgage underwriting guidelines without government backing. Each of these types serves specific roles in legitimate lending practices, whereas air loans are strictly associated with deceptive schemes.