What term is used for a buyer that uses the identity of a willing third party in a loan transaction?

The term "Straw Buyers" is used to describe individuals who participate in a loan transaction by using their identity for someone else, typically to help another party obtain a mortgage or purchase property. In these situations, the straw buyer does not intend to occupy the property or take ownership in a genuine sense. Instead, they lend their identity and creditworthiness to facilitate the transaction for the actual buyer, who may face challenges obtaining financing due to credit issues, lack of income documentation, or other concerns.

This practice is often viewed with caution in the mortgage industry because it can lead to fraudulent activities, such as misrepresentation of the buyer's intentions and financial status. Straw buying can also be problematic for lenders, as it obscures the real occupancy and ownership of the property, making it difficult to assess risk accurately.

Understanding this term is crucial in the context of ethical lending and compliance with regulations, as both straw buyers and those who utilize them can be implicated in deceptive practices that violate lending laws.