Is it fraud or not?

Just want opinions on this subject,

A prospect I was interviewing asked me a question that I was unsure of. I didnt really respond so please dont misunderstand Im not asking for what I should have said but what is the right answer to her question.

She has to short sale her investment property because its in foreclosure. A year and half ago she refied it and took the money to buy a condo which she made into her primary residence. So the house in question becomes the investment property. 4 months later she falls down the stairs and suffered minor injuries which have grown into chronic pain.She’s disabled cant work. Her husband fell ill as well last year and could not produce any money.

In a nutshell they have no income. Hoping that things might turn around they rented the investment house and felt they could help out with that rent and catch up with their own personal mortgage on their condo(which is in foreclosure as well). Things did not work out and they were unable to produce income.

Here’s the question, the rent money (which only pays for half of the mortgage on the investment house) has been used by this couple to survive.

Is there some stipulation that says they have to use the rent money to pay for the mortgage on their investment property? Does the owner have the right to do whatever she wants with that rent money. Like in this case survive month to month. Is it fraud in some way and can she go to jail.

Opinions please,

Thank You,

BillMe

No its not fraud, the only downfall of using the rent money for things other than the mortgage payment is the investment property goes into foreclosure.

It’s not fraud to use rent money for something else because that most likely won’t be part of the terms of the loan.