Credit Scores Do Not Predict Actual Default Risk
“The FHFA paper reviewed 200 million mortgages issued from 1990 through 2019, estimating a “stressed default rate” for each one. That estimate determined what each loan’s risk of default would have been had it been issued during the start of the 2008 financial crisis…Subprime borrowers, defined as having credit scores below 660, had a “stressed default rate” largely in sync with borrowers with higher credit scores, the study found.”