Liar Loan

Liar Loan

What Does Liar Loan Mean?

Slang for any mortgage that is based on low documentation or no documentation. On certain low-documentation loan programs, such as stated income/stated asset (SISA) loans, income and assets are stated on the loan application. With other types, such as no income/no asset (NINA) loans, no income or assets are listed on the loan application form. These loan programs open the door for unethical behavior by unscrupulous borrowers and lenders. Also called predatory loans.

Investopedia explains Liar Loan

These loan programs are designed for borrowers who cannot produce income- or asset-verifying documents such as prior tax returns or who have untraditional sources of income, such as tips, food stamps, and welfare. These loans are called liar loans because the SISA or NINA features open the door for abuse when borrowers or their mortgage brokers overstate income and/or assets to qualify the borrower for a larger mortgage. Liar loans 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) to determine the borrower's ability to repay the mortgage.

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