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> If you verify with tax returns, it would be easy to borrow money from a friend and count it as income every year just for loan qualification. 1) Where do I m

> If you verify with tax returns, it would be easy to borrow money from a friend and count it as income every year just for loan qualification. 1) Where do I make friends with people who have such large piles of cash laying around they're willing to front me stacks large enough so I can lie and claim it as income on my taxes to inflate the size of the loan I can get? Multiple years in a row? 2) Once I claim it as income, I owe about a third of it to the federal and state governments in the form of.. income tax. Is my friend okay with only getting about 70% of each loan back after each tax season? I mean, if my rich friend loans me $100K each year, after three years (the number of tax returns I had to show for my last mortgage), He'll have lost about $90K on the deal... wouldn't have just been easier for him to gift me the $90K the first year and I could put it towards my house and then not needed such a large loan in the first place? It'd have saved us all three years of hassle.

MichaelBurge 5y ago
I don't want to derail the thread into discussing exact mechanics. I just think if most people underwrote loans according to their intuition, they'd lose a lot of money. And a tax return is controlled by the same person applying for the mortgage, so is less valuable than the same information split among two people.
- otterley 5y ago
  - MichaelBurge 5y ago
    The FBI has a bullet point "Silent Second" on their page about mortgage fraud, so people have borrowed money for their down payments in the past and been prosecuted for it. That's not a new idea. https://www.fbi.gov/investigate/white-collar-crime/mortgage-fraud https://www.fbi.gov/investigate/white-collar-crime/mortgage-... For the income taxes, my first thought would be "sell an NFT for $200k to a friend", now it's a gain on sale of property that can be offset by buying real estate in an "opportunity zone". Later, your friend can even claim a tax deduction when it gets "stolen". He's self-employed with a business. So $200k in annual sales to his friend, and then he purchases $200k of equipment depreciated over 5 years from the same friend but split among 12 different shell companies so it's not obvious. He does pay taxes the first year, but gets it back over the next 4 years. That page mentions leasing from the owner at inflated rates, and then getting it appraised at a multiple of the profit. It's not a direct example, but does use inflated income transferred between friends. They probably wouldn't mind paying taxes on the lease income during that time, since the multiple is often 20x.
astura 5y ago
"Friends" might be a misnomer, these are usually fraud rings/criminal organizations.

MichaelBurge 5y ago

I don't want to derail the thread into discussing exact mechanics. I just think if most people underwrote loans according to their intuition, they'd lose a lot of money. And a tax return is controlled by the same person applying for the mortgage, so is less valuable than the same information split among two people.

otterley 5y ago
- MichaelBurge 5y ago
  The FBI has a bullet point "Silent Second" on their page about mortgage fraud, so people have borrowed money for their down payments in the past and been prosecuted for it. That's not a new idea. https://www.fbi.gov/investigate/white-collar-crime/mortgage-fraud https://www.fbi.gov/investigate/white-collar-crime/mortgage-... For the income taxes, my first thought would be "sell an NFT for $200k to a friend", now it's a gain on sale of property that can be offset by buying real estate in an "opportunity zone". Later, your friend can even claim a tax deduction when it gets "stolen". He's self-employed with a business. So $200k in annual sales to his friend, and then he purchases $200k of equipment depreciated over 5 years from the same friend but split among 12 different shell companies so it's not obvious. He does pay taxes the first year, but gets it back over the next 4 years. That page mentions leasing from the owner at inflated rates, and then getting it appraised at a multiple of the profit. It's not a direct example, but does use inflated income transferred between friends. They probably wouldn't mind paying taxes on the lease income during that time, since the multiple is often 20x.

astura 5y ago

"Friends" might be a misnomer, these are usually fraud rings/criminal organizations.