A no-doc mortgage is an extinct mortgage product that does not require mortgage lenders to document the borrower’s income or assets. No-doc mortgages are illegal today because they violate the requirement that lenders must verify the borrower’s ability to repay before approving a mortgage.
No-doc loans were also called SISA loans (for Stated Income, Stated Assets) or NINA loans (for No Income, No Assets). In some cases, employment was also not verified (those loans were called NINJA loans, for No Income, Job, or Assets).
The original idea behind no-doc loans was to make home purchases easier for business owners, who often had plenty of cash flow to make a mortgage payment but couldn’t document their income in the traditional way because of all the tax write-offs available to them.
In addition, some homebuyers’ financial situations were so complicated that these loans were created to make the process less burdensome for lenders and applicants. The loans, when made to borrowers with stable businesses, exemplary credit and large down payments, performed well.
However, lenders increasingly pushed the envelope, and eventually sub-prime loans with very high rates and fees and no down payment requirement or income verification hit the market. They are blamed by many for starting the foreclosure crisis in 2008.