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Yet average FiCO [consumer credit] scores for the pool, percent of no-doc["Liar"] loan to value measures and other indicators were pretty static.... The point is that these measures could stay roughly static, but the overall pool of mortgages being issued, packaged and sold off was worsening in quality, because for the same average FICO scores or the same average loan to value, you were getting a higher percentage of interest only mortgages.-The Big Short by Michael Lewis

I don't know what "value measures" part exactly means.

ice man
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1 Answers1

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The term is "loan to value". It is expressed as a percentage, or a ratio, of the requested loan amount to the appraised valuation of the house. It is used as a measure of risk by a lender in determining whether or not to approve a mortgage application.

In the context of your question, both the loan to value ratio and borrower credit score (FICO) are measures of risk. The rest of the passage you quoted describes how neither were reflecting the higher risk of interest-only mortgages:

The point is that these measures could stay roughly static, but the overall pool of mortgages being issued, packaged and sold off was worsening in quality, because for the same average FICO scores or the same average loan to value...

"These measures" refers to FICO scores and loan to value ratio.

Ellie Kesselman
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