All Forum Posts by: Account Closed

Do you have a credible citation for this belief? How would an actuarial approach be better?

Which came first--FICO is unreliable and so invited gaming, or gaming made FICO unreliable?

The thing that makes FICO scoring contemptible is that the punishment (demerits for derogatory data) doesn't always fit the crime (incorrect data). That is, if you're having a beef with a creditor--as I am at this very moment over a $244 Verizon bill I don't owe--one's FICO score can be as compromised as if I filed bankruptcy and skipped out on ALL my debts! In other words, the infamous Score Factor Code #22--"serious delinquency, derogatory public record or collection filed"--makes no distinction!

There are so many things functionally wrong with FICO scoring that it INVITES "gaming." While the majority of consumers deserve their score, for those who don't, gaming becomes a fine art that is soon disseminated throughout the Internet and reduced to a formula approach for which crusaders like Brian Diaz hope to make a darn good living.

I recall an article in Gentlemens Quarterly where they took bums off Skid Row, cleaned them up, dressed them in cool expensive clothes and took professional photos. You couldn't distinguish them from anyone on this board. Didn't change them from being bums but they sure looked good.

Likewise, when credit is "cleaned," the lender often gets a deadbeat who likely won't change his spots. The problem is that there's not enough flexibility in FICO scoring to rescue consumers from its very real shortcomings. For example, why should I pay a higher interest rate for thirty years just because FICO scoring can't distinguish a small contested collection account from someone who walked on 40K of valid debt?

My solution? Fight the bureaus tooth and nail and dispute, dispute, dispute. One of us will get tired and it's not going to be me. While I'm at it, I'll dispute the valid derogs (if any), too. Because one credit derog is the same hit to one's score as a hundred, it's SOP to dispute everything.

&%$#@! FICO.

The solution seems so simple: 4% FRMs for the 63% of Americans who are homeowners! The resulting improvement to household monthly cash flow will be plowed back into the economy, thereby returning tax revenues to the Treasury to pay off the deficit caused by the stimulus.

So rent 'em a storage unit for thirty bucks a month and send 'em on their beautiful way.

But, it didn't explode into widespread use in the mortgage world until the rise of the personal computer and the introduction of desktop underwriting which was based largely on the FICO score. That is when lenders started "reducing cost" by not doing the kind of underwriting they had historically conducted before.

The FICO model gave them the confidence to relax their due diligence practices. But, when the FICO became all important, it didn't take long for people to learn they could game the system and artificially inflate their scores.

Manhours needed to "underwrite" a loan file prior to mandatory FICO score: about 45 minutes.

Manhours needed to "validate" a loan file after mandatory FICO score: about 45 minutes.

Folks, the entire reason that FICO scores were mandated by Fannie/Freddie was to remove underwriter bias from approval decisions. It was thought that "predictive modeling" was fair, accurate and faster than reading LOX (letters of explanation) written by creative loan originators. (We used to attach a Kleenex to especially cry-worthy files.)

Lemme see if I can dig through Fannie's archives and locate the exact edict that announced this momentous decision.

But they didn't lower their lending standards--unless you're saying they put borrowers in loans riskier than full doc, fully amortizing 30 year FRM and 5 year ARM. What riskier loan might that be?

You know, Paulson said he would listen to anything. Maybe some/all the creative minds at Bigger Pockets should put together a proposal and send it to him. I think "National GO Zone" is a great idea.

For your consideration:

Mitt Romney NYT Opinion

Thomas Friedman--What to Do About the Big 3

GM's Rebuttal to Thomas Friedman

Da Deep, you could agree to buy the homeowner's houseful of used furniture and then politely decline at the end. Tell her, "Why don't you try selling yer stuff on eBay?"

Her attorney sounds like a piece o' work.

Stacy, would you please (generally) outline your hard money terms here?