Which of the following is an example of residential mortgage fraud?

Deliberate misrepresentation in loan documents is a clear and classic example of residential mortgage fraud. This practice involves intentionally providing false information in the documentation required to secure a mortgage loan. Such misrepresentation can include inflating income, falsifying employment status, or misrepresenting the true financial condition of the borrower. This act is illegal and undermines the integrity of the mortgage lending process, as it can lead to lenders making decisions based on inaccurate information, ultimately resulting in financial loss and potential legal consequences.

While the other options may involve unethical practices within the mortgage industry, they do not fit the strict definition of fraud as well as deliberate misrepresentation does. Providing inaccurate property valuations, for example, may be misleading but lacks the direct intent to deceive that characterizes fraud. Similarly, coercing borrowers into higher interest rates may involve unethical behavior but does not inherently involve falsification of documents or information. Lastly, failing to inform about mortgage penalties, while potentially problematic from a regulatory standpoint, does not explicitly constitute fraud unless it involves active deception about those penalties.