Cash Back Scheme is when the buyer and seller or the buyer and real estate agent conspire to deceive the lender as to the true sale price of a property. The seller or the real estate agent give the buyer a cash rebate or concession which is not disclosed to the lender.

Most lenders accept a cash rebate or concession maximum of 3-6%. This becomes a problem and fraud when it is not disclosed to the lender. On many occassions appraisal fraud is collaborated into the equation.

For Example; Seller is asking $150k for a his house. The buyer makes an offer of $160k and requests $20k returned in repair expenses or rebate at closing. In too many of these case the numbers are higher, and the end result for the property another bank foreclosure.

Also see : Mortgage Fraud