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Owner Occupancy Fraud and Mortgage Performance

39 Pages Posted: 5 Jan 2016  

Ronel Elul

Federal Reserve Bank of Philadelphia

Sebastian G Tilson

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Date Written: 2015-12-17

Abstract

We use a matched credit bureau and mortgage data set to identify occupancy fraud in residential mortgage originations, that is, borrowers who misrepresented their occupancy status as owner occupants rather than residential real estate investors. In contrast to previous studies, our data set allows us to show that such fraud was broad based, appearing in the government-sponsored enterprise market and in loans held on bank portfolios as well. Mortgage borrowers who misrepresented their occupancy status performed worse than otherwise similar owner occupants and declared investors, defaulting at nearly twice the rate. In addition, these defaults are significantly more likely to be 'strategic' in the sense that their bank card performance is better and utilization is lower.

Keywords: Mortgages, Mortgage default, Consumer credit, Household finance, Misreporting, Fraud

JEL Classification: D12, R3

Suggested Citation

Elul, Ronel and Tilson, Sebastian G, Owner Occupancy Fraud and Mortgage Performance (2015-12-17). FRB of Philadelphia Working Paper No. 15-45. Available at SSRN: https://ssrn.com/abstract=2709312

Ronel Elul (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States
215-574-3965 (Phone)

Sebastian Tilson

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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