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"Verify credit worthiness" : This is part of the problem. The documentation likely only specifies that the banks had to obtain a recent FICO score. Not do 're
by mdda 15y ago
"Verify credit worthiness" : This is part of the problem. The documentation likely only specifies that the banks had to obtain a recent FICO score. Not do 'real due diligence' on the actual credit worthiness of the borrowers.
And while FICO scores may have been relevant data for historical default analyses, as soon as evening courses in 'Fix your credit score' appeared, the historical data became a completely worthless foundation upon which to base any analysis.
So from a legal standpoint, the banks probably have a decent case to claim that they did what they were contractually obliged to do. From a realistic standpoint, though, they see that it's in the hands of politicians now, and they'll settle rather than become/remain a political football in 2012.
- crag 15y agoI would agree with that. Expect the bank also lowered the required FICO score. 15 yeas ago you needed at least 610 score with a 15 to 25% deposit to buy a house. In 2006 you need a FICO score of 520 ad no deposit. You didn't even need job. The banks didn't do their job. They were making fortunes on fees and reselling the loans. BUT the government didn't do it's job either. The banks didn't exactly hide the fact they were doing this. I mean, every real estate agent knew it. I'm sure the various government agencies did too. But no one cared cause everyone was making money. Until the house came down. :)
- williamcotton 15y agoFICO, tell me about RICO.
- arethuza 15y agoI remember reading, it was probably in "The Big Short", that FICO scores are actually a pretty awful measure of whether someone is a good risk for a mortgage.