Taylor wants to buy a house, but he can’t get financing because of his poor credit score. He asks his sister for help, and she purchases the home for him. Taylor pays his mortgage payments to his sister, who then pays the lender. In this example, Taylor is the real buyer, and his sister is the straw buyer. Straw buying allows buyers such as Taylor to make large purchases (commonly homes or automobiles) they would have otherwise been unable to make. Straw buying in itself is not illegal, but it is often paired with fraudulent practices.

Although not against the law, straw buying is greatly disliked by banks and other lenders, who have no idea who is actually paying. This increases the likelihood that the loan will default, often without the lender’s prior knowledge of the straw buying situation. The straw buyer faces risks as well. If Taylor suddenly stopped paying his sister, she would still be legally responsible for making those payments. Failure to do so could put her credit score at risk or even result in bankruptcy or criminal fraud charges.

Straw buying can become illegal for a number of reasons. If the real buyer is not legally allowed to own what was purchased by the straw buyer, then the act is illegal. Likewise, if the straw buyer falsifies any information during the purchasing process, that is considered fraud. Other illegal straw buying schemes might result in the sale of the home (or automobile, etc.) at an elevated price or the financial abandonment of the straw buyer by the real buyer and facilitator.

The criminal defense experts at the Law Offices of Robert J. DeGroot defend alleged straw buyers against fraud charges. Contact our offices for defense against your straw buying or other bank fraud charge in the Newark area.