Liar's Loan

Liar's Loan

A loan made to a person who has not been truthful about some aspect of the loan application. For example, if the borrower overstates his/her income, he/she is said to take out a liar's loan. In most jurisdictions, it is a crime to make false statements on a loan application.
References in periodicals archive ?
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.