MI Executive Sees 'Reverse Migration' of Loans.

Atlantic City, NJ -- The current situation in the subprime mortgage business is the "greatest reverse migration" of mortgage loans from the investor back to the originator, the chief executive of Radian Guaranty told the Regional Conference of Mortgage Bankers Associations here.

S.A. Ibrahim continued these loans required "payments that never made sense in the first place" from borrowers. Wall Street is spooked by rising delinquencies and is forcing lenders to repurchase loans while the lenders still have the ability to do so.

People should have seen this coming because credit and housing cycle downturns are not new. But the secondary market is full of new players that are not familiar with the cycles, he said.

This is because the government-sponsored enterprises and the mortgage insurers have the "disadvantage" of remembering past cycles and have put those lessons into their pricing. They were replaced by those newer players.

Mr. Ibrahim, a one-time member of Fair Isaac's advisory board, said because of that experience, he became aware that a 680 borrower could behave like a 640 or a 720. So relying only on the credit score in underwriting a loan isn't good.

He recalled when he worked for GreenPoint Mortgage that company came up with a broker score. Lenders can't be in the business of doing alternative loans, he said, without looking at where their loans are coming from.

Another lesson from his time at GreenPoint involved investors. At first investors asked ...