Webster's
absurd ridiculous
If it wasn't so sad I'd die laughing. I also kept on thinking that the article must be satirical, but it's not.
CNNMoney.com staff writer Les Christie recently wrote an article entitled "Good credit can't protect borrowers from bad loans." Maybe the real issue is can borrowers protect themselves from, well themselves.
Listen to this;
"Many now troubled borrowers had excellent credit when they got their mortgages. But they took out loans that they couldn't afford to buy homes that were too expensive."
Why would they do that?
Let's see, the house costs too much, and I can't afford the payments, allright where do I sign?
Next;
"Credit scores alone are no guarantee that borrowers will be able to keep up with their payments."
I can't disagree with this, because I think:
Sufficient income might help!
The article further states that 20% of "subprime" borrowers with scores between 840 and 900 were 60 days or more deliquent. I've been a lender since long before we've had credit scores and I've never seen a 840. Also if they had an 840 why would they get a subprime loan. It further states that the default rate was roughly equal to those with scores in the 540 to 599 range. It seems that the writer is stating that the higher scores were as likely to default as the lower scores.
I'm not buying it!
The writer quotes author Richard Bitner, "Greed, Fraud & Ignorance: A Subprime Insider's Look at the Mortgage Collapse," as saying that the problem was that underwriters didn't consider other items such as income and debt. I mean why should they bother with such trivial items. Even if they didn't the borrower sure should have.
Okay, so borrowers who had previously made good financial choices, and had good scores because of it, made some extremely bad decisions in regards to purchasing a home. They had a real good idea that they could or couldn't afford the home. They had a responsibility to read the documents or inquire as to why some of the programs seemed to be such a good deal.
I agree good credit alone cannot protect a borrower from anything, only the borrower can do that by making those good decisions, which they had made in the past, to develop that good score.
As for the 840 to 900 scores, I don't know how that default ratio was developed and frankly I find it hard to believe. Aren't these scores confidential?
I must say that out of all the articles I have read about the mortgage dilemma I find this one to be;
Truly Absurd!
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Jay, repaying the loan was never the issue - that's what adds to what you call "absurd." People were only counting on living in their home long enough to flip it for a good profit and move on - they wern't interested in the payments - they saw this as a never-ending goodtime.