What is the term for loans secured by nonexistent property?

The term for loans secured by nonexistent property is referred to as "air loans." These are fraudulent loans that are issued based on fake or non-existent real estate. In this scenario, lenders are misled into believing that a legitimate asset is backing the loan when, in fact, there is no actual property to secure it. This kind of scheme typically involves falsified documents and can lead to significant financial losses for lenders and investors, as well as legal consequences for the parties involved in creating the fraudulent loan.

Understanding this terminology is crucial in the realm of mortgage financing because it highlights the importance of due diligence and property validation in the lending process. Additionally, recognizing air loans can help prevent potential losses within the financial system.