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Federal Reserve Bank of Philadelphia
Working Papers
Owner occupancy fraud and mortgage performance
Ronel Elul
Sebastian Tilson
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.


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Ronel Elul & Sebastian Tilson, Owner occupancy fraud and mortgage performance, Federal Reserve Bank of Philadelphia, Working Papers 15-45, 17 Dec 2015.
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Keywords: Mortgages; Mortgage default; Consumer credit; Household finance; Misreporting; Fraud
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