A mortgage fraud in which a borrower misrepresents the facts related to the occupation of the house to be acquired. Occupancy fraud occurs when a borrower who applies for a mortgage to buy an investment property states in the loan application that the house will be occupied by the owner.Financial institutions that offer loans tend to give lower interest rates to mortgages on owner-occupied homes, contrary to investment properties that receive higher interest rates based on the higher delinquency risk.