Interest article about Credit Scores and subprime issue

[Fresh_Start]

http://www.businessweek.com/magazine/content/08_07/b4071038384407.htm

[villager]

1. "Some hospitals have even begun checking FICO scores before admitting patients."

That line tells you all you need to know about America.

[Fresh_Start]

2. I agree, that is downright scary

and why we need universal healthcare

[Gormy Cuss]

3. There's nothing wrong with using FICO scores as a rough indicator

Here's the problem, in a nutshell:

"Until a few years ago, FICO was just one factor in the underwriting process. But as Wall Street grew hungrier for mortgages it could stuff into securities and sell to investors, it came to value FICO as an easily understood risk measure. Lenders were all too happy to use it as a substitute for laborious underwriting. "There were investors around the world demanding more and more deals, with investment bankers happily supplying the business," says Ron Chicaferro, a mortgage consultant in Scottsdale, Ariz. "It trickled down to the lender, who told their sales force, The faster you can get me a score and close a loan, the better. We'll forgo the documentation.'"

The FICO score model is not a substitute for basic verification of assets as shown on the application.

[Fresh_Start]

4. I was thinking that using FICO score as a measure

in terms of evaluating the Mortgage securities when they were packaged for sale in secondary market was a substantial problem which compounded the laxity in underwriting.

[Gormy Cuss]

6. IMHO, securitizing mortgages is the practice that drove the RE frenzy of recent years

and it is insufficiently regulated, compared to older portfolio lending practices.

I'm not fond of the expansion in application of credit scores and credit reporting to employment screening or to the use of credit reporting data over a company's own experience with a consumer, but that's another thread.

[Matariki]

5. Credit scores seem irrational

One person I know, who less than 2 years ago declared bankruptcy, has a score 100+ points higher than another person who has low credit card debt and paid all their bills on time for years. How does that work?