Mortgage Fraudhypothecary fraud
It is often termed self-certification, which is mostly used by self-employed people (also known as liars' loans), where those who apply for the mortgage, or someone like a mortgage agent who applies for it, with or without their knowing the amount of money required to be eligible for the mortgage. Creditors have now, and this is undoubtedly too belated, sharpened the "standards" for such credit requests.
This alone is no protection against fraudulent earnings, as the documents are forgery-proof and therefore taxes and account statement are changed to ensure the necessary assistance for the bloated earnings. That is fraudulent because those applying for the credit would not have been eligible for the credit if the actual revenue had been revealed.
Part of this fraud contributed to causing the "mortgage meltdown". "There was a knock-on effect when the number of inhabitants in costly neighbourhoods, towns or villages overestimated their incomes when they bought a house, as price did not reappear until later. Such is the case when a individual presents himself as a self-employed in a non-existing business or as an alternative seeks a higher management level role in a physical business to substantiate the credit application.
That kind of scam is about cover-up. Instead of declaring all credits such as an outstanding mortgage and/or debit balance in an honest manner, the individual does not declaration them in order to decrease the amount of the projected obligation stated on the mortgage request. These omissions merely lower the indebtedness rate, which is an essential actuarial criteria for determining entitlement to a mortgage lending.
DTI (debt to earnings ratio) is the percent of a person's total earnings per month that should go towards the payment of his or her indebtedness; however, these indebtedness may involve the payment of insurances, etc. When exaggerated, cash is procured in the shape of funding, and when it is exaggerated, it is usually (a) to obtain a lower rate for a closed -off house, or (b) in a scam to persuade one or more lenders to lower the amount due on the mortgage in the shape of a credit change, e.g. to cut down payment.
That system involves estimating fraud up to fool the creditors. Such systems expose creditors to significant loss because successive mortgages/loans are "subordinated" or less significant to the original and first mortgage, which is sometimes, but not always, called for.