Liar's Loan

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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 ?
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.