According to the Financial Times, the models that the banks and securitizers use to predict mortgage loan defaults only relied on credit scores. The FT claims that they did not take loan to value ratios into consideration. As a result, they are surprised that homeowners with negative equity are defaulting on their loans. Could it really be possible that people dealing with tens of billions of dollars in mortgage debt didn't realize that someone would be more likely to default if they owed more than the value of their home? If this is true, it is really incredible. What qualifications do you need to work in the financial industry?
--Dean Baker
