Would you consider a borrower purchasing multiple "primary residence" loans as mortgage fraud? He does live in them for a month or two (even 6 months) before turning them into rental properties. (Admission when questioned but not sure it was the intent to start with) But at the time of application, they are planning to move in to the property. Trying to determine if it is just an "Unwise decision" to try to get lower interest rates, etc. by stating it will be their primary, when they really are going to live there for awhile, or if they are truly doing something "illegal". I think I am to close to the situation to think clearly..... and need some outside opinion.

I would think so. I had an oddly similar situation about 15 years ago. My customer was trying to buy an owner-occupied condo in a 4-unit building. It was newly constructed in a large development. Come to find out he had offers on the other 3 units in that building and he applied at 3 other lenders for owner occupied mortgage loans for them. I filed a SAR.

It is mortgage fraud plain and simple. They most likely get a lower rate for a principal residence. If you are using standard secondary market documents, the DOT/Mortgage binds them to at least twelve months unless they receive written permission from the lender.

6. Occupancy. Borrower must occupy, establish, and use the Property as Borrower’s principal residence within 60 days after the execution of this Security Instrument and must continue to occupy the Property as Borrower’s principal residence for at least one year after the date of occupancy, unless: (1) Lender otherwise agrees in writing, which consent will not be unreasonably withheld; (2) Lender determines that this requirement shall cause undue hardship for the Borrower; or (3) extenuating circumstances exist which are beyond Borrower’s control.

Thank you for confirming my thoughts!