Thursday, March 27, 2008

Zippy Cheats & Tricks

by Calculated Risk on 3/27/2008 11:51:00 AM

The Oregonian is reporting this morning on a JPMorgan Chase memo titled "Zippy Cheats & Tricks". The Oregonian obtained a copy of the memo, and the memo apparently offers tips on how to get loans through Chase's in-house automated loan underwriting system:

The document recommends three "handy steps" to loan approval:

Do not break out a borrower's compensation by income, commissions, bonus and tips, as is typically done in a loan application. Instead, lump all compensation as the applicant's base income.

If your borrower is getting some or all of a down payment from someone else, don't disclose anything about it. "Remove any mention of gift funds," the document states, even though most mortgage applications specifically require borrowers to disclose such gifts.

If all else fails, the document states, simply inflate the applicant's income. "Inch it up $500 to see if you can get the findings you want," the document says. "Do the same for assets."
...
"This is not how we do things," [Chase spokesman Tom Kelly] said. "We continue to investigate" the memo, Kelly said. "That kind of document would neither be condoned or tolerated."
Added: the article very clearly states this was for stated income loans - and that Chase no longer offers these loans. In no way do I think this was Chase's policy - instead this shows how some people (possibly Chase insiders) were helping borrowers (or mortgage brokers) commit mortgage fraud.