Occupancy Misrepresentation, Realtor Pressure, and a Wire Change
Alex is a loan officer at a nonbank lender. A borrower is approved for a $360,000 conventional loan at primary-residence pricing, a 6.25% rate, and $2,650 monthly PITI. The file contains a lease showing the borrower's current home rented to a tenant at $2,400 per month through 2026, plus a landlord statement confirming the tenancy. The borrower says he will 'move in after the lease ends' but wants primary-residence pricing because 'everyone does it.' The realtor texts Alex: 'We need to close Friday; the seller has another offer. Don't let underwriting kill this over an occupancy letter.' Separately, Alex receives an email that appears to be from the title company with new wire instructions, a different account number, and a request that the buyer wire $72,000. The email domain is the title company's name with one letter changed. The borrower plans to wire from his bank on Thursday.
1. How should Alex handle the occupancy issue?
Read the worked answer
Primary-residence pricing requires a genuine intent to occupy the home as a principal residence within 60 days of closing and for at least 12 months unless extenuating circumstances apply. A lease running through 2026 directly contradicts that intent. Alex cannot ignore the lease, accept the borrower's verbal assurance, or coach him to say he will move in sooner.
The file should be disclosed to underwriting, and the loan should be reclassified as an investment property or denied if the borrower will not occupy it as required. Investment-property pricing and underwriting apply. If the borrower insists on primary-residence terms while intending to rent the property, that is occupancy fraud, a material misrepresentation to the lender and investor. Alex should document the conflict and decline to submit or close the loan on false terms.
2. What should Alex do about the changed wire instructions?
Read the worked answer
Alex should treat the email as suspected wire fraud. The changed account number and one-letter domain alteration are classic red flags. Alex should not use the email's contact information, should not forward the instructions to the borrower as if verified, and should not let the closing proceed on those instructions.
Alex should call the title company at a known, independently obtained number, speak with a known closing contact, and verify the account in writing. The borrower should be warned directly. If funds have already been wired, the borrower should contact his bank immediately to request a recall, notify the title company and lender, preserve the emails, and report the incident to law enforcement and the FBI's IC3. Closing should be delayed until the wire instructions are independently verified.
3. What ethical and reporting obligations apply to the realtor's pressure and the suspected fraud?
Read the worked answer
The realtor's deadline and the seller's competing offer do not justify misrepresentation. Alex owes duties to the lender, investors, and consumers to present accurate information and to follow fraud-reporting procedures. Alex should not alter the occupancy description, omit the lease, or ask the borrower to sign a false occupancy statement.
Alex should document the realtor's message, report the suspected occupancy and wire fraud through the company's fraud or suspicious-activity process, and escalate to compliance. The loan should not close on the current terms. If the realtor continues to pressure Alex to conceal material facts, that should be documented and may need to be reported to the realtor's broker or regulator. Protecting the transaction timeline is never a justification for participating in fraud.