[apo]

> Some $2.5 billion worth of subprime loans, those with FICO credit scores below 690, ended up in mortgage bonds in the first quarter of 2019. That is more than double a year earlier and the highest level since the end of 2007, according to Inside Mortgage Finance. There was $1.9 billion worth of subprime mortgage bonds in the second quarter.

Statements like this are hard to evaluate without knowing the denominator: the total value of new mortgage bonds in each period.

All too often, an author who should know better throws the reader a scrap like the following sentence:

> The market for unconventional home loans is still tiny compared with the rest of the mortgage market as well as its precrisis past, when unconventional borrowing peaked at more than $1 trillion.

But this still doesn't convey what percentage of the loans are to sub-690 FICO borrowers.

I see this all the time and wonder to what extent it has contributed to mistrust of the traditional media.

If we find out that the percentage in 2019 is 1% but in 2007 it was 56%, that casts the entire story in a different light.

[rayiner]

The problem is that most journalists are innumerate. As Matt Yglesias notes, "many reporters and editors don't really understand what they're doing. Reputable colleges hand out degrees to people who have almost no understanding of quantitative methods." [1] These journalists see the numbers as garnishes on a narrative point. They're not trying to put the numbers in some sort of mathematical context to draw sound conclusions. They may not even realize that there is a difference between using numbers for garnish and deriving meaning from numbers.

[1] https://www.theatlantic.com/politics/archive/2007/12/innumer....

[kurtisc]

I've noticed a trend on BBC news.

'[X market/stock] slumps as [thing related to X] [does something]'

Yet when you go and look at the long-term graph, it's well within normal variance. There's no evidence they're connected at all. I'm sure it happens with other media providers too.

Why? Because they didn't have the numbers right, or just didn't check at all. Well, if I'd written a statement like that in an essay during my schooling, I'd be marked down for unsubstantiated claims at best or admonished for plagiarism at worst.

I find it irresponsible that the news rarely cites its sources beyond admitting they bought it from AP/Reuters. I believe it should be enough to prevent them being cited as a trustworthy secondary source until they at least have their justifications to a level that would be considered adequate by a high school history class. It's the only reason citogenesis happens on Wikipedia.

[nostromo]

Matt Yglesias himself fits that mold perfectly -- studying philosophy at a prestigious university -- and going on to write about economics, politics, and foreign policy, not philosophy. Best I can tell he's never had any kind of role other than blogger/journalist.

[tryitnow]

I think that explains only part of the problem.

The other problem is that for-profit media would never have an incentive to hire journalist with quantitative skills. There's very little demand for it outside of trade and professional presses and I would bet media companies would have to pay quant journalist at least twice as much as regular ones.

So why should media companies hire and publish quant journalists? There's no good reason.

And that's also why journalism programs don't teach serious quantitative methods - there's not going to be demand for journalists with those skill sets.

The obvious exception to this is trade and professional publications, but those are often subscribed to by businesses with a vested economic interest in the information.

[munk-a]

I think it's a bit more complex than that though. Experts within these fields should be a resource for journalists to access, perhaps in some fields - like economics or legal matters - it's prudent for the news organization to have internal specialists that can evaluate the raw data and draw independent conclusions - but that's not scalable. I think the issue is more that experts with vested interests who lie repeatedly to news organizations don't end up being ostrasized and instead thrive, leading more experts to follow suit and putting news organizations in the position where they either need to accept the interpretation at face value[1] or else try and make an inexpert evaluation of those facts. I think this is associated with the fact that the world is growing in complexity. A hundred years ago most people had built or helped to build a house and could call B.S. if a poorly constructed building collapsed and the constructor tried to claim unexpected ground instability - now a-days if the wiring in a building causes a fire that results in fatalities most members of society aren't able to go and look at the sight and reason whether that wiring was faultily installed or whether there really was a crazy factor out of the electrician's control.

The specific example I used above is actually perfectly terrible because I think we do still have accountability in a lot of the "trades" since so many people work independent of large firms and feel empowered to call out bullshit, but that's sort of what I wanted to highlight - it's when we're talking about an industry that is largely consolidated or centralized (like say banking) where everyone who knows what's going on is employed either by the primary party or a friend of the primary party that we get a breakdown of the truth.

1. I.e. Those iraqis have weapons of mass destruction because intel and this mustard coloured powder.

[asdfman123]

I think the problem is they're not entirely innumerate but they have precious little time or resources to really do their articles justice, and they aren't as facile with numbers as engineers are so they botch them a little bit.

[ChuckMcM]

Exactly this, and then there are people who exploit this in order to skew perceptions as described in "Proofiness: How you're being fooled by the numbers."[1]

[1] https://www.amazon.com/Proofiness-Youre-Being-Fooled-Numbers...

[TheOtherHobbes]

I think the problem is more that most economists are innumerate. Economics meets virtually all of the definitions of a pseudo-science. Just because there are differential equations in a paper doesn't mean it's real science with proven predictive power.

(Anecdata, but why not?) In the run-up to 2008 I was having regular random conversations with non-technical people about the fact that the bubble was about to pop. It was obvious to them that valuations were divorced from all common sense.

But most expert economists and/or bankers were insisting the valuations were correct, and there was no cause for concern.

In this kind of context - and there's a very long history of it in finance and banking, so it's hardly a one-off - it seems a little strange to be picking on journalists for alleged innumeracy.

Put crudely, it isn't journalists who do the damage.

[aznpwnzor]

imo part of the problem is our liberal arts influenced college education system.

because college has moved away from being a luxury of broadly educating landed gentry to being a signaling of "i can be employed and responsible" the train a generalist approach doesn't really work.

To be specific, there are two types of journalists/writers

1. domain experts that are good writers/communicators 2. good writers/communicators with an ability to pick up domains quickly

at some point the 2nd type of person will be out of their depth. but the 1st type of person is expensive.

Why are Matt Levine and Adam Minter (even Krugman sometimes) such great journalists? All were domain experts first.

Great journalists that were not domain experts still exist, but they are more of the investigative variety. the ones that win Pulitzers.

[chatmasta]

I think this is due to how writing is taught throughout school. It’s all about a thesis and supporting evidence. There are a lot of parallels between a good essay and a math proof. And yet, there will always be a gap between them because prose does not have space for the rigor required by math. That gap gets filled with bullshit because the path of least resistance is to pick a thesis first, and then cherrypick evidence to support it.

The best journalists are aware of this and also remember the other lesson from English class, which is to consider counterarguments. But even then, there is never enough space for all the counterarguments, so those are cherrypicked too.

[hinkley]

Journalists, or people, some of whom are journalists?

[chiefalchemist]

A start would be that the rest of us stop considering these type journalists. Call them reporters. Call them writers. But journalism is a verb. And if you're not going to act appropriately then you're not worthy of being labeled with the title.

Words matter. They shape worlds. Ironic, huh.

[xenocyon]

Calling the absolute numbers re subprime loans a "garnish" is subjective at best and wrong at worst. Even if the subprime-to-prime ratio hasn't changed much, a large increase in the ballooning subprime total may still be newsworthy in its own right.

[js2]

I don't understand this criticism of the article. The point of the article is that lending standards are starting to loosen. The article provided a handful of numbers and one anecdote.

The article title and first sentence are: Mortgage Market Reopens to Risky Borrowers. Strict lending requirements that were put in place after financial crisis are starting to erode. The risky mortgage is making a comeback.

Supporting facts are:

- "Borrowers took out $45 billion of these unconventional loans in 2018, the most in a decade, and origination is on track to rise again in 2019."

- "Unconventional loans are largely being extended by nonbank mortgage lenders. But big banks have found another way in ... Some $2.5 billion worth of subprime loans, those with FICO credit scores below 690, ended up in mortgage bonds in the first quarter of 2019. That is more than double a year earlier and the highest level since the end of 2007."

Then there's the single anecdote about a borrower with a sub-690 FICO. Is sub-690 arbitrary? Yes. Is this borrower an example of an egregious loan? No. But is this someone who could not have gotten a loan previously? Yes. It supports the article.

The article is fair in its assessment:

- "Big banks’ mortgage arms are still avoiding riskier borrowers, leaving them to nonbank lenders. Still, the increase in unconventional loans shows that lenders are looking farther afield for customers."

Let me put it another way: at what point should the WSJ write an article like this? The 2008 financial crises cratered the economy after previous lending standards became lax. We put regulations in place to prevent that from happening again. Those regulations are starting to be weakened again. I want to know that.

[qroshan]

"The most in a decade" is where all the shenanigans of the article lie.

Let's say Peak 2006, Sub-Prime Loan was $600B

Let's say the average, natural Sub-Prime Loan is $100B

After the crash, may be the market over-corrected way to much and slowly crawling back to it's natural $100B.

With this perspective, the narrative becomes totally different. The lending standard is still too tight and still way below what the natural / average economy support. Remember there has to be a balance between exuberance and over-cautious. A journalist should find out, what the happy medium is

That's why numerical literacy is important

[dawsmik]

The FICO score is only one consideration. The biggest problem with the loans in 2007 was lack of verification of income and buyers qualifying on a mortgage amount that would eventually go up. A 650 FICO borrower with a good job, downpayment and an affordable monthly payment is a pretty good risk.

[rockinghigh]

My assumption is that someone with a score less than 700 probably had late payments on some of their debt.

[ErikAugust]

"That made him an appealing borrower to an unconventional lender, according to Tom Jessop, a loan consultant at New American Funding. Mr. Jessop arranged a $675,000 loan on the $1.1 million property, leaving the lender with a significant buffer should Mr. Licht default."

Also, this is a TERRIBLE example of a pending subprime crisis. A guy borrows $675K on a $1.1 million property.

[JackFr]

It's only worth $1.1 million when someone pays that.

[throwaway_law]

>Also, this is a TERRIBLE example of a pending subprime crisis. A guy borrows $675K on a $1.1 million property.

Well isn't the point that you/they are making that determination on equity alone? As we saw in 2008 all that equity can disappear in a blink of an eye. Equity has no bearing on ability to repay. So before deciding if this is a good or bad loan wouldn't we need to know his outstanding debt to income ratio?

And neither Equity, or ability to repay (debt/income ratio) has anything to do with subprime lending or a subprime lending crisis. Subprime generally means enticing debtors with interest rates below prime, with a loan that will adjust to above prime (and many times even into a single balloon payment at the end which statistically almost no American can make). No one should qualify for such loans on the basis "you may be able to refinance again at the end to avoid the balloon payment", if you don't have the cash on hand to pay the balloon payment, you shouldn't qualify for these types of loans.

[lostphilosopher]

> wonder to what extent it has contributed to mistrust of the traditional media.

Is anyone's experience that "non traditional media" or news sources are more mathematically rigorous?

I understand that all media has bias, lots of content is written by non experts, and presenting data (especially statistical data) is really hard and rarely done well. But any "alternative" or "non mainstream" news source I've seen is _way_ worse at those things than traditional mainstream sources like NYT, WP, Economist, Foreign Policy, NPR, 538, etc. Even while those sources still make noticeable blunders.

(Curious because I've seen this statement before.)

[rco8786]

Yea agreed. It’s almost a straw man of sorts where there’s this proverbial “they” that gets it right and uses rigorous standards that the traditional media falls short of. But I’ve yet to find these sources of information in the wild.

[dawhizkid]

I didn't realize 690 was the cut off for "subprime." I thought that was generally considered "ok/good" but not really that bad.

[selimthegrim]

I guess they’ve tightened the screws a bit - in principle

[Goronmon]

I see this all the time and wonder to what extent it has contributed to mistrust of the traditional media.

I'd say it's more likely that people are mistrustful of the media because the media will say things they either don't like or don't agree with personally, rather than a specific concern about articles lacking certain context on complicated topics.

[TomMckenny]

Exactly so. That and continuous denunciation of the free press by a certain category of new politicians.

Actually, this article differs in no way from similar articles written since printed news was invented. Which of course means that all the other criticisms, including imprecision, are still valid. It just means that it is not the source of the recent spike in media dislike.

[tjpaudio]

I believe the news here is a resurgence of growth in a mortgage type that has otherwise been declining or stagnant the last 10 years, not so much an alarm about the current state of affairs. So what you said is correct and all, but I think you miss the point.

[throwaway_law]

> The market for unconventional home loans is still tiny compared with the rest of the mortgage market as well as its precrisis past, when unconventional borrowing peaked at more than $1 trillion.

And the number of defaulted loans/foreclosures was tiny compared to the total toxic (sorry, not letting them re-brand toxic loans as unconventional) assets. However, that tiny number of defaults/foreclosures, was enough to overturn the entire economy...but for Bush's $1T+ bailout followed by Obama's $1T+ bailout, banks and wall street would have crumbled, instead the got to consolidate with their new taxpayer cash on hand.

The banks and wall street recovered, of course homeowners and American working class taxpayer never did, so its time to run the whole scam again and get those devious working class American's who escaped 2008 unharmed.

[zaroth]

FYI, the foreclosure rate spiked from a historical rate around 0.5% to around 2.3%, which is actually a massive increase.

[sjg007]

Less than 690 is subprime? I would’ve thought closer to 640...

[SilasX]

740 can be subprime if you have a short credit history.

Source: me.