The acronym NINJA stands for no income, no job, and no assets. Often, I hear this described as lenders willing to make mortgage loans to borrowers with no income, no jobs, or no assets. Technically, this is not correct. NINJA loans were mortgages where the borrower did not have to supply verification of income, job, and assets.

On any mortgage application, including a NINJA loan, the borrower must state his or her income, place of employment, and assets. With an ordinary loan, the borrower provides documents the allow the bank to verify these statements that the borrower makes on the application. A pay stub would be one such document. A bank statement would be another.With a NINJA loan, the lender takes the borrower’s word for what is put on the loan application.

With either a NINJA loan or a regular loan, the borrower commits fraud if the borrower’s income, job, or assets do not match what is on the application. When house prices were rising, lenders were happy to overlook fraud, because the borrower did not default, so who cares?

My point here is that many, if not most, of the loans that are going into foreclosure are loans where, if the investor wanted to press the case, the borrower could be found guilty of fraud. Nobody wants to do this. Instead, we are all supposed to feel sorry for the borrowers. But it is another reason to argue that, in Tyler Cowen’s phrase, this was predatory borrowing.

There were many borrowers who did not know that they were lying on their loan applications. The lender may have filled out the application for them. But some borrowers knew they were lying and did it anyway.