As months went by, the credit score requirement for this "stated loan" or "no doc loan" or cynically "liar's loan
" slipped to 720, and then to 680 and then lower.
With the advent of "no-doc" and "stated-income" loans--sometimes dubbed the "liar's loan
"--versus full-income disclosure, lenders increasingly face potential exposure to a smorgasbord of what the FBI calls fraud for profit.
The great thing about debt as a commodity is that unlike, say, topsoil or petroleum, you can always create more of it--hence the subprime mortgage and the notorious "liar's loan
Some very specific causes were behind the meltdown (mortgage industry speculation, liar's loans
, credit default swaps and collateral debt obligations to list a few), but the report asserts that the crisis was "built on longer-term structural weaknesses in the global economy." Chief among these are the vast, long-term, unfunded liabilities related to an aging population, including pensions, social security and rising health care costs.
The mortgage industry introduced teaser-rate mortgages, "liar's loans
"--mortgages that they knew, when they issued them, that the family after two years would either have to find a way to refinance, with very high fees for the company, or would lose the home.
Self-certification mortgage business also came under fire, earning the nickname "liar's loans
" because they allowed borrowers to self-declare their salary, leaving them open to abuse.
These "stated income loans" became more aptly called "liar's loans
" within the subprime business.