Stated Income Loans

More on the article from Mortgage Resolution Services...
The loan product that really brings the problem into the forefront is the stated income loan. This loan invites the borrowers to "state" their income for the purpose of loan qualification without the requirement of providing supporting tax returns, and this invitation is generally only extended to those with a strong credit score. These stated income loans are failing at an alarming rate because they were offered to borrowers for whom the loan type was entirely inappropriate...but by no means "subprime" borrowers.
As much as it should not be the duty of the mortgage industry to protect borrowers from themselves, it is clear that imprudent underwriting practices have been a major reason for mortgage defaults. There's no point in flogging homeowners whose only crime was to take on a bad mortgage - in most cases a mortgage that should not have been available to them in the first place. We can make progress towards a solution, but it is going to take a big commitment from the mortgage industry.