Scams in No Income Verification Home Equity Mortgage Loans

By Gina Pogol
Mortgage Credit Problems Columnist

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If you have bad credit and have a hard time proving your income, a No Income Verification (NIV) home equity loan can seem like a dream come true. And it can be--if you actually have sufficient income to make the payments.

Certain home equity lenders target homeowners with less education, low income, or poor credit for abusive lending practices. One of the tools they use is a home equity loan that doesn't require the borrowers to prove their income.

What is an NIV Home Equity Loan?

Some borrowers are self employed and have a hard time documenting the actual cash coming in from their businesses because of large tax write-offs. Others get income from alimony or child support and may have difficulty coming up with canceled checks to prove they receive the income. For these and other borrowers, NIV loans, also called stated income loans, can make the difference between being approved and declined for financing.

"Liars' Loans" for Home Equity Financing

NIV loans are also called "liars' loans" in the industry because some loan officers use them to get a borrower approved for a loan he can't possibly afford. If a lender writes in an income for you that is clearly higher than what you make, or pressures to you state a higher than realistic income on your application, you may be about to be stripped of your equity. Scammers saddle bad credit borrowers with loans that carry high rates and fees, and could suck the equity from your home and cause you to lose it.

Always check your loan documents, and never sign anything that overstates your income. Review your loan documents, check the rate and fees, and make sure that the payment is one you can safely afford.

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