Table of Contents

Stated Income/Stated Asset (SISA) Mortgage: Meaning, How It Works

By

澳洲幸运5官方开奖结果体彩网:Alice Zhang

Updated July 14, 2024

Reviewed by

Doretha Clemon

Woman doing paperwork related to her stated income/stated asset (SISA) mortgage — FG Trade Latin / GettyImages

Definition

The stated income/stated asset (SISA) mortgage was a casualty of the 2008 subprime mortgage crisis. Borrowers with SISA loans were able to state their income without verification, leading to many inflating their worth to qualify for more than they could afford.

What Is Stated In𝐆cܫome/Stated Asset (SISA) Mortgage?

A stated income/stated asset mortgage (SISA) loan application allows th🍌e borrower to declare their income without verification by the lender. These loans were designed to ease the application process for buyers with incomes that are difficult to document, such as the self-employed and those who depend on tips as a significant portion of their income.

SISA loans are one loan in a category of products called Alt-A. SISA loans are known as no income-no asset (NINA) and liar loans.ౠ&nbs𓄧p;Loosened lending requirements allowed the SISA loan to play an influential role in the 2008 subprime financial crisis.

Key Takeaways

A stated income-stated asset (SISA) mortgage is a type of Alt-A loan application that allows borrowers to declare their income without verification by the lender.
Initially, SISA borrowers faced stringent loan requirements, including higher interest rates, substantial down payments, and higher credit score requirements.
In the 2000s, SISA requirements loosened as lenders were eager to issue loans, and borrowers were happy to avoid documentation requirements.
Eventually, the ubiquity of SISA loans—and the foreclosures attached to them—exacerbated the 2008 financial crisis.
Today, SISA loans are used only for borrowers seeking to purchase investment properties.

𓃲Understanding Stated Income/Stated Asset (🔯SISA) Mortgage

The SISA mortgage originated as a tool for potential homeowners in specific financial situations to apply for a mortgage. For example, 澳洲幸运5官方开奖结果体彩网:self-employed individuals often maximize 澳洲幸运5官方开奖结果体彩网:tax deductions to reduce their 澳洲幸运5官方开奖结果体彩网:adjusted gross income (AGI). Thus🌜, they have access to cash flows that may not appear on individual tax return🌃s.

Us♐ually, lower AGIs would make these borrowers less attractive to lenders. The SISA loan can also help buyers who earn their income from tips or ot🍃her unconventional cash payments.

Initially, these loans had stringent conditions to offset the risk presented to the mortgage lender by lowered income disclosure requirements. SISA borrowers faced a combination of higher interest rates, more substantial down payments, and higher 澳洲幸运5官方开奖结果体彩网:credit score requirements than traditional loans required. The borrower might need considerable cash reserves available in their bank accounts. Additionally, the loan might limit the new 澳洲幸运5官方开奖结果体彩网:monthly mortgage payment to a percentage over their current 澳洲幸运5官方开奖结果体彩网:housing payment.

Loosening of Mortgage Requirements in the 2000s

Mortgage market conditions encouraged lenders to loosen mortgage requirements in the early 2000s. SISA mortgage and other Alt-A loans subsequently became popular.

These loans served both the needs of mortgage lenders and borrowers. Lenders wanted to book as many new loans as possible before reselling them in the 澳洲幸运5官方开奖结果体彩网:secondary mortgage market. Borrowers were happy to 澳洲幸运5官方开奖结果体彩网:avoid documentation requirements, especially as SISA loan terms and interest rates approached those of traditional loans. The alignment of interests led to unqualified borrowers receiving and defaulting on loans they couldn't afford. As a result, loan foreclosures increased in 2007, as the 澳洲幸运5官方开奖结果体彩网:2007-2008 financial crisis took hold.

In the wake of the 澳洲幸运5官方开奖结果体彩网:2008 meltdown, legislators and regulators scrutinized SISA loans, and the marketplace for these loans tightened once again. The 2010 Dod༺d-Frank Wall Street Re🧔form and Consumer Protection Act severely restricted SISA loans, making them unavailable for owner-occupied properties. Today, these products are the venue for borrowers seeking to purchase i𝓀nvestment properties.

Important

Mortgage lending discrimination is illegal. 澳洲幸运5官方开奖结果体彩网:If you think you’澳洲幸运5官方开奖结果体彩网:ve been discriminated against based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age, there are steps you can take. One such step is to file a report, either with the or the .

What Documents Can You Use for Income Verification if You're Self Employed?

Typically, pay stubs are used for income verification for hourly or salaried workers. However, the self-employed don't receive a traditional pay stub. As a result, lenders usually accept your income tax return, personal and business bank statements, an income statement from your business, or proof of additional income, such as rental income or interest dividends.

Can I Qualify for a Mortgage if I Recently Became Self-Employed?

Lenders are typically reticent to extend mortgages to those with little income history—many require at least two years of 澳洲幸运5官方开奖结果体彩网:self-employment income history to get approved for a loan. However, every lender is different. You may find one that will 澳洲幸运5官方开奖结果体彩网:consider prio👍r traditional employment or accept a shorter period of self-employment. When shopping around for lenders, look for those that have less stringent standards if you're new to self-employment.

Can a Self-Employed Person Get a Conventional Loan?

Although 澳洲幸运5官方开奖结果体彩网:self-employed people may require more paperwork to quantify their financial fitness, they're still eligible for conventional mortgage loans.

The Bottom Line

Establishing 澳洲幸运5官方开奖结果体彩网:credit-worthiness is a big part of applying for a mortgage. Following loose lending standards for income verification that exacerbated the subprime mortgage collapse of 2008, SISA mortgages aren't available for res✤idential use. Self-employed people can 🙈qualify for a mortgage loan. However, lenders require additional and different documentation to assess their ability to repay their debt.

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