Straw Buyer
A straw buyer is someone who purchases property on behalf of another person who cannot or does not want to buy the property in their own name. While sometimes used for legitimate privacy reasons, straw buyer arrangements are often associated with mortgage fraud when used to circumvent lending requirements or hide the true buyer's identity from lenders.
Example
“The mortgage fraud scheme used a straw buyer with good credit to purchase properties that the real buyer couldn't qualify for.”
Memory Tip
Like a STRAW man scarecrow - it looks real from a distance but is just a fake standing in for something else.
Why It Matters
Using straw buyers in mortgage fraud schemes is a federal crime that can result in significant fines and imprisonment for all parties involved, making it crucial to avoid any arrangements that misrepresent the true buyer to lenders.
Common Misconception
Some people think using a friend or family member to buy property in their name is always illegal, but legitimate straw buyer arrangements exist when properly disclosed and not used to defraud lenders.
In Practice
A celebrity might legitimately use a trusted associate as a straw buyer to maintain privacy in a purchase, but if someone uses a straw buyer to hide bad credit from a lender while secretly providing the down payment, this constitutes mortgage fraud.
Etymology
From 'straw man,' a term dating to the 1890s describing someone who acts as a front or substitute for the real person, like a scarecrow made of straw.
Common Misspellings
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