...
No doubt a lot of other players deserve more blame for the meltdown in home lending: mortgage brokers, pool underwriters, hedge fund speculators. But Fair Isaac gets a little blame, too, because its scores did not deliver the predictive power that was expected of them.
...
mortgage lenders got a little too confident in FICO and failed to give adequate weight to two other factors in a mortgage application: how much the borrower is putting down and how well he has documented his income.
...
Even Fair Isaac says it's not surprised that its scores have missed the mark in a lenient lending environment. "FICO scores an individual's risk over time. It's not an assessment of the riskiness of the loan made," says Ronald Totaro, a Fair Isaac vice president. He adds that creditors should not be making lending decisions solely on FICO scores.
...
My comments. Well duh.
FICO scoring is a tool, and things like income, assets, et al. don't factor in. A FICO score is but one piece of the puzzle because it is an assessment of borrower risk.
It is incumbent on the lender to assess the loan product riskiness and whether it is an appropriate match based on the borrowers credit risk (FICO score), assets, income, DTI, money down, history with the lender, time in a job, etc.
If jackhole lenders were issuing loans based on FICO scores alone, well, then they deserve their losses.
I think the author is very offbase in his condemnation of FICO.
