Liar Loan
A category of mortgages properly known as low-documentation or no-documentation mortgages that have been abused to the point where the loans are sometimes referred to as liar loans. On certain low-documentation loan programs, such as stated income/stated asset (SISA) loans, income and assets are simply stated on the loan application. On other loan programs, such as no income/no asset (NINA) loans, no income and assets are given on the loan application form. These loan programs open the door for unethical behavior by unscrupulous borrowers and lenders. Investopedia Says:
These loan programs are designed for borrowers who have a hard time producing income and asset verifying documents (such as prior tax returns), or who have untraditional sources of income (like tips, or a personal business). These loans are called liar loans because the SISA or NINA features open the door for abuse when borrowers (or their mortgage brokers or loan officers) overstate income and/or assets in order to qualify the borrower for a larger mortgage.
Low-documentation mortgages usually fall into the Alt-A category of mortgage lending. Alt-A lending depends heavily on a borrower's credit score (FICO score) and the mortgage's loan-to-value ratio (LTV) as tools to determine the borrower's ability to repay the mortgage. Related Terms:
Alt-A
Loan To Value Ratio - LTV Ratio
Low / No Documentation Loan
No Doc Mortgage
No Income / No Asset Mortgage - NINA
Stated Income / Stated Asset Mortgage - SISA
Subprime
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