liar’s loan

n. money borrowed from a financial institution under false pretenses, especially in the form of a “stated income” or “no-doc” loan which can permit a borrower to exaggerate income. Subjects: English, Money & Finance

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Citations: 1992 Lew Sichelman Oregonian (Portland, Oregon) (Nov. 9) “Mortgage Detectives Root Out Application Lies”: You rarely hear anything about individual borrowers who tell little white lies, the ones who obtain so-called “liar loans,” but they’re just as prevalent, if not more so. A young New Jersey couple, “the Deceivers,” said they intended to occupy the seaside house they were purchasing. When the mortgage insurance company checked, it found out they had bought the place strictly as an investment and were renting it out. So it kicked the loan back to the lender, and again, the lender called the loan due. 2005 Kevin Coop Mortgage Banking (Feb. 1) “Grappling with Loan Quality” vol. 65, no. 5, p. 80: 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. 2007 Christopher Dodd OpEdNews.com (Feb. 7) “Hearing On Preserving The American Dream: Predatory Lending Practices And Home Foreclosures”: Over half of subprime mortgages are stated-income loans, loans which the industry often refers to as “liars loans.” The question is, who’s lying? According to a survey of over 2,000 mortgage brokers, 43% of brokers who make these loans do so because they know that their borrowers don’t have the income to qualify for the loan.

Posted 9 Feb 07 | Permalink | Tell a Friend