Which fraud schemes are often connected to a nonperforming loan?

• A. Construction over-budget items
• B. Bribery
• C. Land flips
• D. All of the above

Answer: (D)

When a loan stops performing, fraudsters often use schemes that hide losses or misstate the value backing the loan. Construction over-budget items can be used to siphon loan proceeds or justify further draws by padding invoices or misrepresenting project progress, making the loan look safer than it is while funds disappear. Bribery can influence who approves loans, appraisals, or other critical decisions, masking true risk and enabling the loan to continue despite problems. Land flips—moving real estate among related parties at inflated prices—can inflate collateral value or create fake profits, helping the borrower obtain financing or disguise losses and delays. Each of these tactics can be tied to a nonperforming loan, so all of the above is the best answer because a nonperforming loan often involves multiple fraud methods aimed at sustaining the loan or concealing bad performance.