False loan is a category of mortgage loan that requires minimal or no documentation of income and assets.
Low documentation and undocumented loans were originally intended for borrowers who found it difficult to prepare documents to prove their income and assets.
These loans were a contributing factor to the financial crisis of 2007-2008 as a significant rise in real estate values prompted brokers to promote these types of loans.
Regulatory reforms such as the Dodd-Frank reform require lenders to reasonably and in good faith determine a borrower’s ability to repay any home-backed loan.