Welcome to BP Victor!
Very strange first question!
It's not just banks that check Victor. There are initial red flags, insurance company, utilities, credit reports, tax billings, other related public filings, name/address search.
But it's loan audits that can turn up cheaters, lying about occupancy, these are done by private compliance auditors hired by the bank, then you have regulators who audit and loan servicers.
Audits are done in the early stage of the loan, after closing. There could be several audits as loans are sold and securitized in the process. After that, loans are audited on a random basis or again if other questions arise, like that name popping up on title closing lists for other properties.
Regulators, such as FDIC, Comptroller, CUNA, State Bank Examiners, all do audits. These government agencies have police powers at the state and federal level. As a past bank examiner for FDIC, I could tell you how cheaters are caught, but then I'd have to kill everyone on BP, that wouldn't be nice at all. LOL I guess there are "secrets" in real estate.
Maybe if you use a smart phone, it will tell you where you spend most of your time......if the feds are looking at you, they will find out.
That's about all the public needs to know.
Now, Goggle "Bank fraud" and "Mortgagor Fraud" and read what you find.
Lying on a mortgage application is bank fraud or depending on the lender and type of loan, mortgage fraud and can be securities fraud.
Penalties can be up to a fine of $100,000 and/or 10 years in a federal prison. That is usually reserved for the criminal types, intentionally deceiving to obtain financing. You buy a place and move out in the 3rd month, they will most likely call your loan due. But you're also on the radar, if there is a pattern of violations, you can get the grand prize.
Part of the fun with FDIC was investigations. I could simply go someplace and inquire about anything, look up "pretexting investigations" I might play like a customer, or act like a out of town relative, or a guy from the school board, whatever mask I thought might get me "in". I was very good at it too, BTW. If we look, we will find.
Your occupancy requirement generally falls off after 12 months, it may also be waived if circumstances beyond your control should arise. It's not as if you are chained to the property either, you can have a life but that better be your residence in the first year.
Lastly, a borrower will never know when or if they are audited, they also won't be notified until it is completed. At that point the evidence will be had. So, folks here can't really tell you much, unless they are willing to admit being caught. You might also just get lucky, just keep in mind the penalties and ask yourself if it's worth it.
Your question was much like asking a cop where he likes to sit to catch speeders, pretty obvious. Good luck :)