It's the term a mortgage lender uses when you say your buying a property for X but instead use it for Y.

Such as getting a residential mortgage but rent it out instead. Or getting a Buy-to-Let mortgage but live in it instead.

Now circumstances change (after time) so if you ask nicely to change, they are usually accommodating.

If your mates mortgage broker used it on application to a lender? Basically they don't believe his story.

Maybe he told them he wants a Buy-to-Let (as it has less strict affordability criteria) but the lender doesn't believe him as he's a FTB living at home and thinks it could be "scheme abuse" and that he will live in the property instead.

However the means is just me speculating. It could be anything, put simply they don't believe the story and scenario matches the mortgage they applied for.

Maybe he told them he is buying a small 1 bed terrace to live in a middle of a council estate. When he already owns a 4 bed with a large family in a nice part of town. That would raise a red flag that na, he's going to rent that terrace out. He's applied for wrong mortgage, it's scheme abuse.

Your friends mortgage broker may be in a bit of trouble too, mortgage advisors are supposed to catch scheme abuse before submitting an application.