Besides subprime foreclosures, the nation is now being tackled by liar loan defaults. Liar loans is a label giving to all mortgages that were approved without proof of the borrower´s income/assets, basically proof that they could pay back their loan. Some liar loans have even been given the nickname of ninja loans, (no income, no jobs, no assets), where nothing was required before giving the loan. Pick-a-payment or adjustable rate mortgages (ARM) loans were even given, allowing borrowers to defer some interest payments and add them to the loan principal.

The co-founder of First Houston Mortgage, David Zugheri, commented as to why so many loans of these types were given, saying that competition was high and they knew that if they did not provide the borrower with the loan they desired, the borrower "could go down the street and get that loan somewhere else." These loans were also profitable to those in the industry as they came with high fees and interest rates, something that is not seen in traditional lending.

A housing economist in Virginia, Thomas Lawler, said that these types of loans are "heavily concentrated in states where home prices are plummeting", which in essence is Arizona, California, Florida, and Nevada. There is almost no way out for those with liar loans there, as refinancing is not an option due to drastic plunge in home prices and lenders now requiring full documentation of a borrower´s assets and income.

According to Moody´s Economy.com, almost $100 billion in losses due to liar loans could be expected, which will only add on to the $400 billion loss estimated in regards to subprime loans. Fannie Mae and Freddie Mac, together lost $3.1 billion from April and June. Half of that loss was due to sour liar loans, otherwise known as Alternative-A loans, for borrowers that were below the level for being A-credit prime borrowers. Many banks that previously specialized in Alt-A loans have already crumbled, such as American Home Mortgage, Bear Stearns, and IndyMac Bank.