NINJA Loans

NINJA Loans refer to a type of subprime mortgage that is extended to borrowers without the need for documentation of income, job history, or Assets. The acronym stands for “No Income, No Job, and No Assets.” These loans were popular in the early 2000s, particularly leading up to the 2008 financial crisis, as lenders relaxed their underwriting standards.

Examples:

• A borrower applies for a home loan without providing any proof of income, such as pay stubs or tax Returns, and is approved based solely on their Credit Score.
• A self-employed individual seeking to buy a property does not submit any financial statements or business records but is granted a loan based on a verbal declaration of their earnings.

Cases:

• During the housing boom, many lenders offered NINJA loans to attract borrowers, leading to an increase in risky lending practices.
• After the financial crisis, these loans became infamous for contributing to high default rates, as many borrowers were unable to meet their repayment obligations due to overestimating their financial situations.