Final answer:
The borrower in this scenario is committing mortgage fraud by obtaining two separate cash back refinances on the same home without informing either lender about the other loan. This is known as double dipping or loan stacking and is considered fraudulent and illegal.
Step-by-step explanation:
The borrower in this scenario is committing mortgage fraud by obtaining two separate cash back refinances on the same home without informing either lender about the other loan. This type of fraud is known as double dipping or loan stacking. It involves the borrower receiving multiple loans using the same property as collateral and can lead to serious consequences.
When a borrower closes on a cash back refinance, they receive a certain amount of cash based on the equity in their home. By obtaining two separate cash back refinances without the lenders' knowledge, the borrower may be able to deceive each lender into providing a larger cash payout than they would have approved otherwise. This can result in the borrower receiving more funds than they are eligible for and potentially defaulting on both loans.
In addition to the financial implications, double dipping is considered fraudulent because it involves intentionally deceiving lenders and obtaining funds through misrepresentation. It is illegal and can result in legal penalties, including fines and imprisonment.