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This is a link to a short entry that gives the abstract to a linked article about the possibility of a genetic variation pertaining to borrowing.

http://pubcit.typepad.com/clpblog/2012/12/is-there-a-gene-fo...

Could be interesting, could be unsettling. What if lenders started demanding DNA tests before they agreed to lend large sums of money? Or before hiring a CEO?

Nancy
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Interesting correlation. Impulsiveness and a lack of conscientiousness are attributed to the gene mutation in question, and therefor it is hypothesized that those who carry the mutation will indulge in more high-cost borrowing.

I personally hypothesize that the same mutation may be found commonly amongst those lenders who partake in high-risk lending.

xtn
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I personally hypothesize that the same mutation may be found commonly amongst those lenders who partake in high-risk lending.

I was wondering about that. There are times, obviously, when risky behavior pays off; all you need to do is read about some of the start-up companies that sounded dubious on paper but paid off with huge rewards. But there are other times when it definitely doesn't. Not just start-ups, but a lot of those banks that were willing to accept fake mortgages and other bad loans.

Nancy
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Actually the use and possible misuse of genetic testing is a scarey potential problem in many areas of life. The problem for mis-use is similar to the problem of Insurance Companies using auto insurance applicants FICO scores to rate and price insurance policy products. They use the FICO scores simply because: 1. They exist, and 2. they are inexpensive for an insurance company to obtain from the UnFair-Issac corporation. FICO scores were NEVER designed to ever rate insurance risk of any kind yet they are frequently used that way. There used to be a term: "There Out to be a Law". In this case State Insurance Commissioners could simply administratively prohibit insurance companies from accessing applicants for insurance FICO Scores.

Kahuna, CFA
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Not to mention that the statistical correlation has proven accurate over time, and has saved quite a LOT of people quite a lot, while causing risks who are more prone to incurring claims to pay more of their share of losses they incur. (You really should stick to something that you may actually know something about, whatever that may be - This ain't one of them.):

It is beyond debate that the use of credit-based insurance scoring models can provide lift to insurers in the underwriting and rating processes. The correlation between a person’s credit characteristics and that person’s propensity to have insurance losses has been demonstrated by several credible multivariate analyses. As the Federal Trade Commission and several states’ studies have shown, credit-based insurance scoring models are demonstrably efficient and accurate in predicting insurance losses. Moreover, the results of the model are consistent over time.

http://www.naic.org/documents/committees_c_090430_hearing_su...

Insurers have been allowed to continue to use the models, simply because they have very adequately been proven to work effectively. If they didn't work effectively in risk selection, they would have ditched the models. But that's not the case. In fact, as time has passed and court cases were won, the number of insurers using FICO based Insurance Scoring has increased very substantially.

While The use of credit information in insurance pricing and underwriting is heavily disputed - The correlation, between credit-based insurance scores and overall insurance profitability and loss, has not been disputed.
http://en.wikipedia.org/wiki/Insurance_score
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FICO scores were NEVER designed to ever rate insurance risk of any kind yet they are frequently used that way.

And thalidomide was never designed to treat leprosy or cancer. Yet it has been proven effective in these rolls. I guess we should ban its use since that was not the original intent.

Acme
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