Investopedia defines “liar loans” as,
“A category of mortgages known as low-documentation or no-documentation mortgages that have been abused to the point where the loans are sometimes referred to as liar loans. On certain low-documentation loan programs, such as stated income/stated asset (SISA) loans, income and assets are simply stated on the loan application. On other loan programs, such as no income/no asset (NINA) loans, no income and assets are given on the loan application form. These loan programs open the door for unethical behavior by unscrupulous borrowers and lenders.”
By “simply stated,” Investopedia means that, even though I might earn just $20,000 per year, I could walk into bank, “simply state” that I earned $50,000 per year and the bank would take my word as true without verifying my income. The bank would then issue a mortgage for a house appropriate for a $50,000 annual income rather than a $20,000 annual income. Because the bank wouldn’t bother to verify my income, I’d be free lie about my income and therefore move into a house that was perhaps twice as large as a house that I could actually afford.