Sunday, June 29, 2008
Money for Nothing - WSJ.com
As the author says, "plenty of brainpower" but "short on common sense"...
In the Wall Street Journal, James R. Hagerty discusses a new book:
"Not everyone in the business was corrupt, of course. But too many were. After giving a concise overview of how mortgage loans are made and sold, Mr. Bitner exposes some of the industry's dirty little secrets for making borrowers look more creditworthy than they are:
- A large car payment keeps a couple from qualifying for a loan. But, in a fluke, car debt is recorded by only one credit bureau; the loan officer simply 'drops that bureau from the borrower's credit report and the debt disappears.'
- If a borrower's credit score is too low, it can be manipulated. 'A person with good credit is paid a fee for each account they let someone else use. The person with the challenged credit doesn't get access to the account, just the benefit of the performance history that comes with it.' (A spokesman for Fair Isaac Corp., a provider of technology for credit scoring, says that a new formula, being adopted this year, will thwart such abuses.)
- Does the borrower's bank statements show bounced checks? Never mind. Just give the underwriters copies of the first page from each month's statement, leaving out the grisly details.
- Is the borrower's income too low? 'Desktop publishing programs allow for near-perfect replication of pay stubs and W-2s.'"
