NINA loan

With the NINA loan, borrowers do not have to state their income.

Julie Davis, vice president of corporate communications for Charlotte, North Carolina-based Bank of America, reports that the bank's mortgage company did not offer a NINA loan specifically, but it did offer loans with 80 percent less paperwork.

United Guaranty shared a few of the case files involving fraud it had uncovered in NINA loans. Several of them involved identity theft; false HUD-1 documents reporting earnest money and down payments that were never made; false claims that the named borrower intended to live in the property; credit reports that failed to show significant purchases made by the borrower about the time of the mortgage; filing for a NINA loan through a straw borrower who was unemployed; and even falsification of the age and race of the borrower.

United Guaranty Corporation, a mortgage insurer based in Greensboro, North Carolina, reports that for a period of 2 3/4 years--from January 2001 to the end of September 2003--the default rate for NINA loans that it insures was 5.07 percent.

For example, in 2001, when the number of NINA loans began to be a significant part of United Guaranty's low-doc business, delinquencies were running at 9.7 percent--twice the overall delinquency rate for the universe of loans with similar seasoning, Smith says.

There are three no-income loans: no-ratio, no-income (NRNIs), where the employer is stated and sometimes verified; NINAs; and no-doc loans, which are NINA loans where no employer or employer's address is identified.

One cannot generalize about all NINA loans from the experience tracked by mortgage insurance companies, because insured loans, by definition, involve loans with 80 percent or more LTV.

However, after United Guaranty reviewed the performance of its no-ratio and NINA loans, it found "nowhere near as strong a correlation" as can be found in the general loan portfolio.

The performance of NINA loans with a 740 FICO score was not much better than it was for NINA loans with a 690 credit score, Smith says.