Final answer:
The common mortgage fraud scheme from the choices provided is a silent second mortgage. This occurs when a borrower takes out a covert second mortgage to finance the down payment of the first mortgage, often without the primary lender's knowledge, which is considered fraudulent.
Step-by-step explanation:
The common mortgage fraud scheme mentioned is a silent second mortgage. This type of fraud involves a scenario where the buyer of a house takes out a second mortgage to cover the down payment of the primary mortgage without the knowledge of the first lender. The second mortgage is often not disclosed, hence the term 'silent.' This can be considered fraud because lenders typically require any secondary financing to be disclosed in the terms of the primary mortgage to accurately assess risk factors. The second mortgage often carries high interest rates and may lead to financial strain on the borrower, increasing the risk of default on both loans.
Other options like redlining, blockbusting, and steering are also unethical practices associated with housing markets but are not directly related to mortgage fraud schemes. Redlining is the discriminatory practice of outlining areas based on race or ethnicity for the purpose of denying loans or insurance. Blockbusting refers to the process of inducing panic selling among homeowners by exploiting racial prejudices, and steering involves guiding potential homebuyers towards or away from certain neighborhoods based on their ethnicity.