During the subprime boom, lenders were using “stated-income” loans, which meant the borrower could state their income but no income verification was used. Basically, this type of loan allowed for the borrower to inflate their income and no one would know the difference. Doing so allowed for the buyer to “qualify” for a larger mortgage.
Here’s the deal:
Overstating your income (lying) on a loan constitutes fraud. Fraud is punishable by law.
I haven’t found any hard numbers on how many stated income loans were used or how many of the stated income loans were overstated. But, it shouldn’t have been that hard to figure out. If you say you make $16,000 a month and in reality only make $3,600 per month (an example in the book), it wouldn’t take long for that overstatement to come to light. All one would have to do is find the paperwork and then compare that to tax returns. And, this could be done by those who are helping people stay in their homes.
Unfortunately, prosecuting the fraudsters would most likely be an expensive process.
I’m not against helping those who LEGITIMATELY need help. I just don’t like the idea of helping those who might have committed fraud.
Just think, this entire crisis probably could have been averted had lenders insisted on income verification!