John Preston

Prime Bomb: Former Golden Child Hudson City Bancorp Sees Prime Delinquencies Skyrocket

Good insights...finally...

Equity does not make monthly payments....jobs and income do...

While subprime and no docs loans make good fodder for the media and serve to drive mass angst, ultimately it was overlveraged income via the underwriting process by Fannie/Freddie (and other credit grantors) that crippled the borrowers....you cannot (and F/F did) commit 45%-60% of a homeowners gross income to the mortgage payment and not expect problems...

The myth of the "20% down payment is one of todays problems. The only security for a homeowners a solid job, is consistent monthly income and some cash reserves. The down payment is a non-factor...always has been...and always will be a secondary issue in underwriting...

ANY borrower whose income-to-debt ratio has gone up as a result of declining household income is in deep trouble....and down payments...and high credit scores...and even full doc processing cannot overcome the lack of income....

Hudson BC's CEO was pretty arragant on TV....telling us all that they went by the book and did things the "old fashioned way"...28/36 ratios/downpayments, etc. If Hudson really did this...follwed the old rules, and, keep in mind, F/F was allowing MUCH higher ratios within their AUS systems (over 60%).....what this is really saying that the problem is in the jobs and income...and for many, overlev eraging of income, which is where thisw mess first started....