The prevalence and impact of misstated incomes on mortgage loan applications

McKinley Blackburn () and Todd Vermilyea

Journal of Housing Economics, 2012, vol. 21, issue 2, 151-168

Abstract: Misstatement of income on mortgage loan applications (the “liar-loan” problem) is thought to have been a contributor to the boom and bust of mortgage markets. We provide nationwide measurements that reflect the degree to which incomes on mid-2000 home-purchase mortgage loan applications were overstated relative to the actual incomes of mortgage applicants. Our results suggest a substantial degree of income overstatement in 2005 and 2006, one consistent with the average mortgage application overstating income 15–20%. We find the tendency to misstate income was associated with markets with large home-price increases during the boom. There is little support for the proposition that income overstatement played a substantial role in subsequent mortgage defaults.

Keywords: Mortgage lending; Liar loans; Housing crisis (search for similar items in EconPapers)
JEL-codes: G01 G21 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhouse:v:21:y:2012:i:2:p:151-168

DOI: 10.1016/j.jhe.2012.04.003

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