Fed Curbs Shady Lending Practices

Thank God for blogs. Because without the ability to get facts out to the public via media other than cable and network television news, national news services such as AP and newspapers, we would choke on the garbage that lazy journalist our foisting on the public.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /?>

Take today's headlilne: Fed to Curb Shady Mortgage Practices that is plastered all over the aforementioned yellow journalist sources. With the word "shady" they imply it was wrong for mortgage lenders to approve loans without income verification. What they fail to understand (because they are too lazy to do their homework) is that the entire mortgage system for the past decade or so was built on one core principle: the Credit Score.

If you had a credit score higher than 700, for example, the data that the credit score companies (Equifax, Transunion, Experian) sold to the lenders indicated there was a low risk of default on the loan. Therefore, income documentation was not required.

All underwriters who work for lenders base all residential mortgage credit decisions on credit scores. Even FHA, who claims they do not base credit decisions on credit scores, actually do They merely use an alternative analysis model.

So where are the investigative reports on CNN, Fox News and MSNBC focusing on the bill of goods the credit score companies sold to the lenders. Because, my friends, that is at the heart of the problem: Too much power in the hands of too few.

The three credit reporting bureaus along with Fair Isaac and the other credit score "experts" need to accept liability for their inept approach to credit risk analysis. Why isn't Senator Dodd or Bernake at the Fed talking about this? Do they own stock in the credit bureaus?