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To: Carl Worth who wrote (26071)	2/18/2007 3:10:16 PM
From: TimbaBear	Read Replies (2) \| Respond to of 78748

Carl Keeping in mind that my definition of sub-prime is: Anything that doesn't meet FNMA's guidelines, then does it really matter by which criteria the borrower doesn't meet those guidelines? If the borrower can't document income (the most common malady in my experience), that's a layer of risk sufficient for FNMA not ot accept. One needs to be aware that the income (and other levels of) documentation goes down under FNMA's automated underwriting as credit scores go up. So a score of 710 would have easy-to-meet documentation. If the borrower can't meet these requirements, then one must assume the added layer of risk is a real one. When I was in the business, FNMA would pretty much rubber stamp loan apps where the borrower had scores above 680 provided that all the elements of the income and history could be independently verified. Scores between 640-680 with an adequate explanation of the problems which caused the low scores could be approved. Scores between 620-640 needed not only the explanation but also independent third party confirmation of the events. Below 620 were not underwritten. I don't compare mortgage lenders so I cannot comment on the relative merits of any. As I said in my first post on this topic, sub-prime lenders will label their products somewhat euphemistically. They also have different pricing for what they consider to be varying layers of risk. But one must not lose sight of the fact that they are sub-prime lenders, no matter what flavor lipstick they happen to be wearing. So one has to ask, perhaps: "Am I in an environment of increasing or decreasing risk of problems for the sub-prime lenders?" or "Do I really feel as though I have a handle on not only the standards to which these loans were underwritten, but also the clauses which might cause them to be repurchased from the pools into which they were sold?" or "Do I believe that the worst news for all of this is fully reflected in the earnings reports yet?" I believe we haven't begun to see ugly, that we don't have a clue as to how much or how little repurchase fall-out and derivative protection (or lack thereof) exists, and only a small portion of the overall impact is reflected in the filings. But then, I've been wrong so many, many times that this could very well be another. Timba