Stated Income / Stated Asset Mortgage (SISA)

Demystifying Stated Income / Stated Asset Mortgage (SISA) Loans

Understanding the nuances of mortgage options is crucial for prospective homebuyers, especially when it comes to alternative financing like stated income-stated asset (SISA) loans. Let's delve into what SISA loans entail, their historical context, and their impact on the housing market.

Deciphering SISA Loans: An Overview

SISA loans, also known as no income-no asset (NINA) loans or liar loans, allow borrowers to declare their income and assets without verification by the lender. Originally designed to cater to self-employed individuals and those with unconventional income sources, SISA loans gained notoriety during the subprime mortgage crisis of 2008.

Unveiling the Origins of SISA Loans

The genesis of SISA loans lies in addressing the unique financial situations of borrowers, such as self-employed individuals with fluctuating incomes or those reliant on cash-based earnings like tips. By bypassing traditional income verification processes, SISA loans aimed to facilitate homeownership for individuals with non-standard income streams.

The Rise and Fall of SISA Loans

Initially, SISA loans imposed stringent requirements on borrowers, including higher interest rates, larger down payments, and elevated credit score thresholds. However, in the early 2000s, lax lending standards led to the proliferation of SISA loans, contributing to the housing bubble that culminated in the 2008 financial crisis.

The Aftermath and Regulatory Response

In the aftermath of the housing market collapse, legislators and regulators scrutinized SISA loans, prompting the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. This legislation imposed stringent restrictions on SISA loans, limiting their availability primarily to investors purchasing investment properties.