Brenda Vingiello, Sand Hill’s Chief Investment Officer, joined Squawk Box to discuss her thoughts on the latest market trends and market outlook for 2025. This
Avoiding Home Mortgage Occupancy Fraud
Published Date : July 18, 2023
July 18, 2023
2022 saw a dramatic rise in interest rates, including rates on home mortgage loans. The rise was so swift that many potential home buyers were quickly priced out of the market. As the mortgage landscape has shifted from the historically low rates that we all have enjoyed these past few years, it is important to understand a specific nuance of how home loans work prior to stepping back into the market.
When applying for a residential home mortgage, the borrower declares which type of occupancy they will utilize for the underlying property: 1) owner-occupied, 2) second/vacation home, or 3) investment property. The first two occupancy types typically have similar mortgage rates, while investment property rates tend to be higher. With the historic rise in mortgage interest rates we have experienced, there could be a temptation to declare one type of occupancy to secure a lower interest rate. However, there are federal mortgage guidelines for declaring occupancy that should be understood by all home loan borrowers prior to entering into a loan agreement.
When purchasing a primary home, borrowers are typically required to sign an occupancy affidavit with their loan documents. If a borrower misleads the lender about their intended occupancy in order to obtain a more attractive interest rate, that can be construed as occupancy fraud. In some cases, borrowers may not even be aware that what they are doing is against the rules. And with mortgage rates rising quickly, some consumers may unintentionally try to bend the rules to save on mortgage costs.
To avoid committing occupancy fraud, the ultimate failsafe is to verify with your mortgage lender prior to changing the occupancy status of the property after it is purchased. There may be special circumstances, such as when someone is unexpectedly required to move for their job, work outside the country for part of the year, or care for an ill relative, where the lender may allow a modification of the loan terms. Intent matters in these situations. If you legitimately planned to purchase a home to live in, but then were forced to move due to circumstances beyond your control, there shouldn’t be anything to worry about. If you plan to purchase a second home with a lower interest rate, then decide to convert it to an investment property soon after purchasing it, that could be construed as intentional. Therefore, it may just be worth a conversation with your lender prior to taking action that may cross into the mortgage fraud realm.
In an ever-changing interest rate environment, it is important to understand the rules surrounding mortgage rates prior to making a property purchase. At Sand Hill, we want to ensure our clients and partners are aware of the rules around occupancy fraud to avoid any unintended consequences. When in doubt, please reach out to your Wealth Manager to talk through the details of your particular situation.
Sources: Federal Bureau of Investigation, HSH, Forbes
Articles and Commentary
Information provided in written articles are for informational purposes only and should not be considered investment advice. There is a risk of loss from investments in securities, including the risk of loss of principal. The information contained herein reflects Sand Hill Global Advisors' (“SHGA”) views as of the date of publication. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. SHGA does not provide tax or legal advice. To the extent that any material herein concerns tax or legal matters, such information is not intended to be solely relied upon nor used for the purpose of making tax and/or legal decisions without first seeking independent advice from a tax and/or legal professional. SHGA has obtained the information provided herein from various third party sources believed to be reliable but such information is not guaranteed. Certain links in this site connect to other websites maintained by third parties over whom SHGA has no control. SHGA makes no representations as to the accuracy or any other aspect of information contained in other Web Sites. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. SHGA is not responsible for the consequences of any decisions or actions taken as a result of information provided in this presentation and does not warrant or guarantee the accuracy or completeness of this information. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA.
Video Presentations
All video presentations discuss certain investment products and/or securities and are being provided for informational purposes only, and should not be considered, and is not, investment, financial planning, tax or legal advice; nor is it a recommendation to buy or sell any securities. Investing in securities involves varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular client’s financial situation or risk tolerance. Past performance is not a guarantee of future returns. Individual performance results will vary. The opinions expressed in the video reflect Sand Hill Global Advisor’s (“SHGA”) or Brenda Vingiello’s (as applicable) views as of the date of the video. Such views are subject to change at any point without notice. Any comments, opinions, or recommendations made by any host or other guest not affiliated with SHGA in this video do not necessarily reflect the views of SHGA, and non-SHGA persons appearing in this video do not fall under the supervisory purview of SHGA. You should not treat any opinion expressed by SHGA or Ms. Vingiello as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of general opinion. Nothing presented herein is or is intended to constitute investment advice, and no investment decision should be made based solely on any information provided on this video. There is a risk of loss from an investment in securities, including the risk of loss of principal. Neither SHGA nor Ms. Vingiello guarantees any specific outcome or profit. Any forward-looking statements or forecasts contained in the video are based on assumptions and actual results may vary from any such statements or forecasts. SHGA or one of its employees may have a position in the securities discussed and may purchase or sell such securities from time to time. Some of the information in this video has been obtained from third party sources. While SHGA believes such third-party information is reliable, SHGA does not guarantee its accuracy, timeliness or completeness. SHGA encourages you to consult with a professional financial advisor prior to making any investment decision.
Other Posts By This Author
- – An Optimal Approach to Beneficiary Designations and Your Children
- – Charitable Giving Strategies Ranging from Simple to Complex
- – Is the 4% Retirement Withdrawal “Rule” Dead or Alive?
- – 2023 Tax and Retirement Planning Updates to Keep on Your Radar
Related Posts
Recent Posts
