The way that I try to explain it is that if you lie to your insurance company to get a better rate, you have committed fraud even if you don’t make a claim. The property was put up as collateral in case the loan went bad. The banks didn’t want the loan to go bad and if they thought that is was going to go bad they probably wouldn’t have lent him the money.
Edited to add: There are companies that make predatory loans with the intention that they will go bad so that they can seize the collateral. But they usually target poor people, not multi-million dollar business loans.
