In the world of commercial real estate, mortgage loan frauds are an unfortunate tradition. Sometimes asset frauds are committed where an individual fails to disclose a credit card or unsecured loan that is being used as the source of downpayment.
Here are some more common examples:
- Claims of Earnest Money Deposits that do not exist
- Claims of employment that do not exist
- Overstatement of employment salary
All these instances fall under a term called kiting, and they are not limited to real estate transactions.
What Is Kiting?
Kiting refers to the illegal use of financial instruments to obtain or increase financial leverage. It involves misrepresentation of financial instruments such as credit cards or bank statements, for the purpose of extending credit obligations.
Apart from the real estate scope, kiting can occur within the banking system where series of checks are passed between two or more banks from accounts that have insufficient funds.
How Check Kiting Works in Real Estate
In real estate, kiting usually involves mortgage loan frauds that are mostly committed for properties or for profits. In most cases, kiting in real estate can come in the form of asset frauds where an individual fails to disclose a credit card or unsecured loan that is being used for a down payment. Also, it may be an overstatement of assets for a down payment.
Additionally, it may also take the form of overstatement of income or length of employment or false claims of employment when the individual is actually unemployed. Other forms of kiting involve the altering of credit card history, hiding liabilities by disclosing debts, cashback and identity theft where a borrower assumes the identity of another person to obtain a mortgage.