Why They Call Them "Liar Loans"...
This is from a paper called Did Securitization Lead to Lax Screening? Evidence from Subprime Loans 2001-2006 (Spoiler Alert: the answer is yes.)
This is a graph of no-doc and low-doc mortgage origination by FICO score. The red line is the 620 FICO cutoff for securitizing the loans.
The graph below shows the subsequent delinquency rates for loans on either side of the cutoff (615-620 FICO scores, compared to 620-625 FICO scores). The higher FICOs had a 20% higher delinquency rate:
There was no such funny business with the full-doc loans.
This is a graph of no-doc and low-doc mortgage origination by FICO score. The red line is the 620 FICO cutoff for securitizing the loans.
The graph below shows the subsequent delinquency rates for loans on either side of the cutoff (615-620 FICO scores, compared to 620-625 FICO scores). The higher FICOs had a 20% higher delinquency rate:
There was no such funny business with the full-doc loans.
posted by Marc Shivers at 12:20 PM
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