Staggering Insight

From eFinanceDirectory.com: 60 Percent of Liar Loan Applicants Exaggerate Income.

The use of stated income loans, or liar loans as they are known throughout the industry, has increased exponentially over the last few years. Analysts at Credit Suisse Group say that liar loans account for 46 percent of the subprime mortgage loans being granted to borrowers.

Liar loans do not require borrowers to prove their income to qualify for a mortgage loan; borrowers merely state what they do and how much they earn doing it on the application.

An April 2006 Mortgage Asset Research Institute study found that 60 percent of applicants who apply for liar loans exaggerate their income by more than 50 percent.

People lied on "stated income" loans? Get out! That's impossible.

Now, let's read the article critically.

60% of applicants exaggerated income by more than 50%.

What about the remaining 40% of applicants?

Chances are they exaggerated their income too but they were relatively less criminal in that they didn't exaggerate their income by more than 50%.

So it looks like most of these people with "liar loans" have exaggerated their income.

What's the probability that they can pay back the loan?

Hmmmm....