A straw borrower is a person that is used to defraud a mortgage lender, but might not qualify to purchase a home.

In the extreme a person is picked up off the street and paid several thousand dollars to purchase a home. The fraudster tells the straw borrower that he will not have to pay the down payment or any closing costs and can become an investor with nothing out of his pocket. Sometimes the fraudster will pay several months worth of the mortgage payments in advance --to further deceive the lender and not raise flags on the loan until numerous other loans have been passed through.

The problem is the straw-buyer is usually purchasing the house above market value with a loan that is also for more than the house is worth. In the end the frausdter or seller of the house is paid more than the house is worth, the straw borrower is stuck with a massive loan, and the bank is stuck with another foreclosure.