Chase mortgage memo pushes 'Cheats & Tricks'

[Robbien]

Source: The Oregonian

A newly surfaced memo from banking giant JPMorgan Chase provides a rare glimpse into the mentality that fueled the mortgage crisis. The memo's title says it all: "Zippy Cheats & Tricks."

It is a primer on how to get risky mortgage loans approved by Zippy, Chase's in-house automated loan underwriting system. The secret to approval? Inflate the borrowers' income or otherwise falsify their loan application.

. . .

Chase, the nation's second-largest bank, originates mortgage loans itself but also operates a wholesale arm that underwrites and funds loans brought to them by a network of mortgage brokers. The "Cheats & Tricks" memo was instructing those brokers how to get difficult loans approved by Zippy.

. . .

Chase's Kelly said the bank has never encouraged any of the suggestions in the memo. "If somebody is putting inaccurate information in their loan application, they're lying and committing fraud," he said.

Still, some local mortgage brokers view the memo as vindication. Brokers have argued they've been unfairly blamed for the lax lending standards that led to a wave of defaults. The large national lenders drove the weakening standards, they argue.

The Chase memo is "a perfect example of one of the big five banks out and out telling mortgage brokers to commit fraud," said Todd Williams, a broker with Evergreen Ohana Group in Portland. "And this has been going on for years."





Read more: http://www.oregonlive.com/printer/printer.ssf?/base/business/120658650589950.xml&coll=7

---

ChaseBank's philosophy on pushing fraudulent predatory loans: Never mind. Nothing to see here. Go out and see if you can place the blame the little guys.

[madaboutharry]

1. What is wrong with this world?

This kind of shit makes me so depressed. Trust no one.

[Robbien]

3. Yup. Trust no one

Fraud was pushed by Banks per this article.

Fraud was pushed by Auditors. See
KPMG allowed fraud at New Century
http://www.reuters.com/article/ousiv/idUSN2631813920080327?sp=true

Fraud was push by Brokers. See
Elderly fear home loss in loan scheme
http://www.dailynews.com/news/ci_8710231

For Charles and Patricia Simmons, the offer seemed like a boon as they coped with extra medical costs: lower monthly payments on their $550,000 Inglewood home, reduced interest rates and $25,000 in cash.

Instead, the couple ended up with no cash, a $5,600 monthly mortgage payment, deeper debt, much of their savings lost - and facing the potential loss of their longtime home.

"There are so many crooked mortgage dealers that are hurting the elderly who are facing the loss of their homes like myself."

Investigators say the Simmonses are among people throughout Southern California who were defrauded - apparently out of millions of dollars - in what officials call an elaborate bait-and-switch scheme operated by a San Fernando Valley group.

"We still don't know how much of a loss there was for the public," said Larry Roberts, a deputy district attorney in San Bernardino who began investigating the Ponys more than 18 months ago.

But all you hear in the news are about homeowners who should be blamed for the whole mess because they bought a house they couldn't afford or signed an application they didn't read or lied about what they put on it.

The whole system was set up to be gamed against an honest home purchase and an honest homeowner.

[Adsos Letter]

71. wrong spot

[The Backlash Cometh]

24. What is wrong with the world is that there was loose accounting going

on in the late 90s, and the SEC didn't have the time and resources to investigate every corporation in every industry to see how they were cheating, and were even less able to after Bush got into office in 2000.

Those big Clinton boom years? That was the upside of Republican chaos capitalism and deregulation. Everyone was cooking the books, defrauding the public, lying and cheating. Which makes those six digit pay outs to upper management really obscene.

It just all caught up with them. They might have had more time if Bush and Cheney would have succeeded in distracting us with another Vietnam that would have taken 52,000 lives.

I would suggest looking at the companies that were investigated by the SEC, because those companies are probably going to be the ones flying straight, and more will be more secure than those that were overlooked.

[liberalmike27]

58. It's all about corporations

controlling our government. It is the definition of Fascism.

[Adsos Letter]

"What is wrong with this world?"

The same thing that has been wrong in America almost since the founding...the glorification of a radical individualism which assigns moral value to actions based purely upon what is best for "me"...and where individual moral "worth" is determined primarily in terms of financial success or failure.

We have substituted an earlier vision of freedom combined with community responsibility for one of freedom defined in terms of personal aggrandizement apart from considerations of community.

...imho...

[trof]

2. Why am I not surprised?

BAU

[Pooka Fey]

4. K&R

[fasttense]

5. It was the perfect con game.

Most Americans grew up in an environment where the government regulated loans so thoroughly that we didn't have to worry about being conned into a scam by the mortgage brokers, banks or finance corporations.

True, it was difficult to get a mortgage but when you finally got the loan, you knew exactly what you were getting. I have bought three house in my life - one in the 1980s, one in the 1990s, and one in 2002.

The first two houses I bought had fairly high interest rates but the the brokers kept explaining everything over and over again. I had to sign at least three different statements saying I understood what the real interest rate was, and that I understood under the mortgage exactly how much and when I would be paying back the money.

But the house I bought in 2002 was different. I did not have all these papers saying I was informed. In fact it was difficult to get any information from the bank. I eventually got a lawyer and it was surprising how quickly they started explaining.

The Congress set up the unsophisticated consumer. First they regulate the financial community so consumers feel safe in getting loans. The Congress built trust into the mortgage system. Then Congress quickly takes away those regulations that protected the consumer. The consumer needs to be extremely cautious now but does anyone explain this? The answer is NO.

Oh sure every now and then someone warned consumers that balloon payments, teaser rates and interest only loans were a bad thing. If the consumer happened to be listening at the right time, to the right program, they may have heard something like this. But Greenspan was pushing home loans and the government was pushing borrowing so that the consumer was more confused then wary. But generally speaking NO ONE came out and said be wary consumer because Congress has repealed the regulations that prevented scam lending practices and you may be left holding the bag.

Our government set us up for a con game and now they are bailing out the con artists.

[dysfunctional press]

7. it's that way with everything from insurance to cell phones to medicare drug plans...

everyone raves about the consumer having "choice", but don't mention that in order to take advantage of the 'choices', the consumer has to be an expert in every field- whereas the sellers only have to be expert in their particular field of endeavor.

consumers don't stand a chance anymore.

[KansDem]

61. "...everyone raves about the consumer having 'choice'."

Just go to the bread aisle at your local grocery store and randomly check the ingredients of several loaves. I'll bet everyone of them contains high-fructose corn syrup, and if you don't want HFCS, you're out of luck. "Choice" my ass...

Yeah, we've been told we have "choice" in this country, but that's a damned lie.

edited for spelling...

[dysfunctional press]

62. the bread i buy uses sugar. so does the ice cream.

i ALWAYS look for brands that use sugar instead of hfcs whenever possible.

[KansDem]

73. So do I

But I have to go hunting for these items; they're not easily available. I now shop at Whole Foods because I know it will have very few, if any, products with HFCS. But what irks me is the idea that we are told we have "choice" in this country. We don't...we take what the corporations give us: cheap, crappy products to assure maximum profit.

[Robbien]

8. Very well put

And even with all the publicity now, the fraudulent practice is still going on. Although the issuance of subprime loans have been reduced, a report the other day said that 30-40% of the business is still on-going. All with the approval of the federal government.

One would think it had been stopped.

[blondie58]

15. yep, we really are at their mercy

I say this as I am trying to sell my house in a 'short sell'. Seems I had got myself into an ARM, and the stupid thing is- I don't remember them even telling me. I tried to refinance, but the value of my house had dropped, making that an impossibility. Compounded with working less hours and no overtime due to a physical injury and having to pay for a lot of medical costs, MRI, surgery co-pay and $80 weekly physical therapist costs, I simply do not make enough to pay for my house. I feel so stupid, as I did sign the papers, but I honestly had no clue, or I would not have refinanced my house.

[moez]

20. "Seems I got myself into an ARM"...

I almost coughed up my fruit loops on that one... What are you - four years old?

[PassingFair]

32. Nice.

My mother refinanced the "family" home so my
brother could borrow some money from her while
he lived in it.

The bank never bothered to tell her that her
TAXES would SKYROCKET when she did so.

She didn't ask me about it, she just did it.

Lucky for you -- you can breathe through
the fruit loop -- but I can't say I'm sorry
for your temporary discomfort.

[moez]

36. hmmmm.....

Do you understand that the bank does not set tax rates?

Oh. And, thanks for your concern over my fruit loop situation.

[Flying Dream Blues]

82. Your rudeness adds nothing to the discussion. You can make your same points

using a civil tone and a dash of human kindness. If you wouldn't say something to a person's face, why do it here? And if you would say it to a person's face, I feel sorry for you.

I'm just getting really tired of what passes for conversation on this site. Just think about it, ok?

[joeglow3]

69. How did her taxes skyrocket????

Property taxes?

[PassingFair]

86. Yep, because it wasn't her primary residence, the taxes "reset"

We have something called the Hedley Amendment here,
which prohibits the upping of property taxes by more
than the prescribed percentage, UNTIL the house is
sold.

The bank never mentioned that the property tax
would jump when she put a second mortgage on the
house. If she had known, she would have just
gotten a HELOC on her primary residence, which
was her FIRST IDEA!

[danimich1]

38. you're nice

[blondie58]

40. thanks so much, moez, as I feel stupid enough

but I really don't remember them telling me about it. I signed the papers, so it was obviously there, but I didn't catch it. I am not blaming anyone- and were it not for some medical problems, torn rotator cuff surgery and recovery, it wouldn't be so bad. Thanks again for such an empathetic response.:sarcasm:

And I sure hope that you didn't choke on those fruit loops.

[moez]

44. Sorry Blondie...

You shouldn't have bought a house that was predicated on your having to work overtime to pay it. And, you REALLY shouldn't have made the largest single investment of your life without knowing the basic parameters of the deal.

I live in a tiny house with a tiny mortgage because that's exactly what my tiny salary can afford. If my job goes south or something happens, I have enough set aside to handle the rough spots.

It may not be nice to hear... but, it's all about being an adult.

[Robbien]

45. What arrogance

You are so smart and wonderful. We should all bow down in your presence.

Of course being so smart, you believe you can freely sneer at and cause pain to those who were trapped in the snare created by this awful system of ours.

I hope if you ever fall into troubles, others are kinder to you than how it appears you treat others.

[moez]

46. Thank you for your kind sentiments.

You sound quite wonderful as well.

However, I fail to see how one is "caught in a snare" when all of the rules and parameters are laid out before him. I would suggest that is more along the lines of "throwing yourself into the snare".

... but, then again, reality hurts sometimes.

[Robbien]

49. Keep having your fun

sticking your red hot poker of arrogance in the guts of people who were defrauded.

Does causing others pain and embarrassment make you feel better in some way?

[Chovexani]

78. That's some compassionate conservatism right there.

[Kajsa]

98. Wow- it's so easy to ridicule a lady

with major medical problems and an outrageous mortgage payment
to boot, eh? What a guy!

"when all of the rules and parameters are laid out before him"-
apparently not!

Bully for you that you can manage your finances come hell or high water.

Too bad you can't understand that isn't the situation for a lot of people, right now.

Understanding others goes a long way.

[Lance_Boyle]

84. pain caused by "the system"

or pain taken on by those who failed to read their contracts before signing them? Easy to blame the system - its feelings can't be hurt. But the parent poster owns her fault in not reading the document. Why can't you take her at her word that she's at fault?

[Gormy Cuss]

47. If it's all about being an adult, perhaps you should grow up.

Blondie58 is the adult here, freely admitting to making a mistake and taking responsibility for it. Your posts are just snotty.

[blondie58]

52. thanks for defending me, Gormy Cuss

especially as I feel foolish enough. I should know better than to share personal information here, as there is always someone who knows better than you and is ready to put you down. If I didn't know better, I might think that Moez was on the wrong board.

[mountainvue]

102. You're doing the right thing. Hopefully

things will turn around once we get a Dem back in office. And yes, I think Moez got lost on his way elsewhere.

[blondie58]

48. I have a good job as a postal worker

and this was a refinance on it- I would have made it, had my mortgage not jumped $500 a month. And yes, you're right it is about being an adult, but how many others are not as financially literate as they could be?

That is my goal for 2008 and beyond to become more financially educated. That is wise of you to choose a house that you can afford and more amazing that you can put some money aside for emergencies, but the fact is, too many people live paycheck to paycheck.

Add to any situation a death, a divorce or an illness and the plan doesn't always run smoothly. I am also a single mom, with an unexpected diagnosis of multiple sclerosis nine years ago. I am not looking for any bailout- I am a survivor, but I know that I am not alone in this situation. I know of several other people. Those closing documents that they have you sign are full of such legal mumbo jumbo, perhaps I should have brought a lawyer into the closing with me, instead of just signing where they told me to.

Peace.

[Cronopio]

54. Being right without being a jerk about it is also a part of being an adult.

Your adding insult to injury is making you look like the consummate adolescent.

Maybe you should work for Chase. Sounds like you've got the mindset.

[JDPriestly]

68. I note that the Simmons in Inglewood were elderly.

If you have the education and experience to understand mortgage contracts, you are lucky. You would be surprised at how many people don't have enough education or experience to understand such documents. I worked with a guy who was a school janitor most of his life. He was a very hard worker, but he did not understand what he was getting into when he bought a house. Working with him on his situation was very difficult because he could not follow slightly complex, abstract thought. He was tricked by a mortgage company (not on a sub-prime mortgage) because he did not have the sophistication or ability to understand what was going on. Taking his savings and his house was like taking candy from a baby. He looked like an adult and worked like an adult, but in some ways he was just a kid. Are you your brother's keeper? I try to be. That is why I am a Democrat. Taking advantage of a person who is mentally not as sophisticated as you is criminal. And that is what these mortgage companies have done. That is what the credit card companies do. It is criminal.

I am especially angry when I hear people talk out of the one side of the mouth about how we are a Christian nation and out of the other side of the mouth about how people are supposed to be grown up enough to recognize scams.

There is not a person alive and certainly not a person on the internet who is smart enough to avoid all the scams that the creative crooks think up. I have seen some really bad ones. The ingenuity of criminals is incredible.

[Quantess]

50. Many, many people got talked into Adjustable Rate Mortgages.

It's the only way they could get approved for a loan.

During the first couple of years, ARMs weren't so bad. My boyfriend had an ARM on his first house, and when he sold the house 3 years later, he had made a small profit. Of course, the very nature of Adjustable Rate means that you never know how high the rates will be set, so, when the rates started going up wildly, that is when ARMs showed their ugly face.

[JDPriestly]

65. Don't be so quick to judge.

Do you always, always, always read the fine print before you sign a document?

Most people don't. Most people just sign. Most people feel embarrassed to take the time to read a document very carefully before signing it. Ask any lawyer. (And, in their personal lives, even lawyers often sign documents without reading them.)

Some situations to watch for:

Read your contract or any agreement you sign when applying for a job or being hired for a job. Watch what you sign in the first days and months after getting a new job. Are you signing an arbitration agreement? Is it fair? Are you being hired at will? What does that mean? Is there an employee manual? Read that too no matter how boring.

Read your contract when you agree to get work done on your car. Is there a warranty?

Read those petitions you are asked to sign outside the supermarket. You might be surprised at what they really say.

Read the arbitration agreement you sign in your doctor's office.

Read all, all, all forms you get in in your doctor's office. At least try to read the section on possible side-effects on any notes accompanying a medication you are given.

Read the fine print on offers for credit cards. Read all of these forms, not just the stuff in large, bold print. Usually there are different interest rates for different kinds of transactions. Watch this. It's very tricky.

Be especially careful about reading the entire agreement -- every word -- when you lease equipment -- say a printer or a car or just a carpet cleaner. You probably have no recourse against anyone if leased equipment does not work. And you never know what might happen. Your could lease a lemon. You could lease something that ruins your carpet or even causes you to get into an accident. The equipment may not be what the provider claims. You are probably leasing the equipment from a finance company that takes no responsibility for the condition of the equipment -- or even fraud by the person providing it. This is a huge trap. You usually have no recourse against the party to whom you owe the money which is the finance company.

This is not legal advice. I'm not telling you which provisions you should avoid. I'm just telling you to read, read, read all that boring stuff. Don't allow anyone, anywhere, anytime to rush you or embarrass you into signing something you have not read. This is especially true with mortgage documents.

[pitohui]

70. it is not possible to read all the fine print on every little thing

i think you know that, priestly, from the tone of your post :-) but i have noticed that as i get older, it is not physically possible, even with reading glasses or magnifying glasses, to actually read the "fine print" on many documents

one day all of the people who claim to read "everything" they sign -- and i used to be one of them -- will wake up and find out that it simply isn't possible and that it isn't a matter of a person being lazy but of many persons above a certain age not being physically capable of doing something and the white collar criminal minds out there taking advantage of that fact

also i've discovered if i read everything in a lease before i sign it, i can't lease the item, as you say, you are taking on huge liabilities and have no recourse in a local court of law but rather have to submit to "arbitration" to some arbitrator who gets all of his business from the lessor and hence is going to lean in their favor -- what do you do then? you still must lease the equipment, cross fingers, and hope for the best

the consumer is out in the cold, with no protections these days, and i'm so tired of the "blame the victim" crap when the victim has no choice, they can sign or they can do without the printing equipment, the car, the house -- it isn't about being an adult, it's about being victimized by bold and vicious criminals who know they will never face justice because they've paid off the politicians

to get a credit card, even to see a doctor, i have to sign away my rights to recourse in a court of law, but you are given no choice, you can't do without the ability to pay for items (the credit card), you can't do without ever seeing a doctor

[JDPriestly]

77. Don't worry. I am very much on your side.

It is very difficult to read every piece of paper that you receive, and most people do not understand the legalese on the forms anyway. Still, you should take the time to read contracts before you sign them. Ask questions. Be a pest. It is the only way that a consumer can get control of a situation. If you are getting into a big transaction, take notes. Bring a friend as a witness. And if you don't agree with something, change the wording and put your initials on the change, but understand that tour changes may not hold be enforceable in a court of law. It's better not to agree to a contract if you don't understand the terms or you don't know what the terms say. If you change an employment contract, you may not get the job. But the job, believe it or not, may not be worth it in the first place.

Also, when you talk to a salesman or service representative of a company, take notes. Note the date of the conversation, the name or number of the person with whom you are speaking and the a brief summary of the content of the conversation. You never know when you will need that information. Keep a little steno pad by your phone. Don't just casually call people without keeping a record.

Right now, you cannot rely on the government to look out for you. Consumer laws are being weakened all the time. Tort reform means ending the enforcement of consumer rights and allowing criminals, scammers and cheats full reign. The proverbial Republican foxes are in the hen house, and that is not good for us hen/consumers.

[Dukkha]

74. peddle your compassionate conservatism over at freeperville

:eye:

[alstephenson]

80. Have you ever heard the saying...

if you can't say something nice, don't say anything at all? I'm sure the poster feels bad enough as it is.

[fascisthunter]

95. I Wonder If You Will Be Laughing at Yourself

the next time you get screwed by somebody. I seriously doubt it....

[acmavm]

105. Are YOU a loan officer? Sounds pretty defensive.

[coalition_unwilling]

42. The only two things that kept the economy going during the

past eight years were the housing bubble and massive defense expenditures (a really inefficient form of Keynesian stimulus, but great if you're a defense contractor), both areas where profit is private but risk is 'socialized'. Now, one of those two props (the housing bubble) has collapsed and the economy is beginning to demonstrate the reality that the housing bubble tended to disguise.

[truedelphi]

64. Bought a home in 1980, 1981

And applied to buy in late 1990's.

Like you said, it is amazing how tight lipped they were later on comp
Also the first two homes were in the Midwest. The third - which I never ended up purchasing - was a deal in which my meagre income qualified me to sign for a 175,000 place. No down payment needed.

I thought that that was very VERY strange.

[JerseygirlCT]

6. So Chase's reaction

is to blame the consumer. Not a word about their instructions to brokers about committing fraud. That's neat. They instruct; the consumer is at fault.

I don't think ANY of the parties in this sort of fraud are innocent. If you allow a broker to knowingly inflate your income, then you ARE committing fraud. If you're a broker who inflates income to secure the loan, you are too. Ditto for the bank encouraging the behavior.

I'd just like to see the consequences spread around along with the guilt.

[JoDog]

11. Chase has some other bad practices

I have friends in the collections business that have told me about some of Chase's practices. Personally, I'm now looking for a new bank.

Chase engages in the practice known as "check stacking" which maximizes their profits in cases of low balances or NSF. To the detriment of the customer, of course. They also are known for engaging in aggressive collections practices (multiple calls a day, sending the account to a collections agency) with accounts that are less than 60 days overdue. Other banks don't resort to that until an account is at least 120 days overdue. Chase has been known to sue for accounts that are less than 120 days overdue. And don't even try to negotiate for short-term interest only payments in a time of hardship. Chase also strangely engages the most aggressive tacticts with customers that have the best payment histories, not the worst.

One of my friends says the Chase execs should just start wearing eyepatches and tricorner hats and carry cutlasses. But that would insult the reputation of pirates, who are at least upfront about what they are doing.

[Dukkha]

76. as a Chase employee I am impervious to their 'business plans'

which is basically to maximize all profits at the expense of the customers and employees.

[Chovexani]

79. Heh, I was laid off by Chase Card Services back in September

The biggest favor they ever did me.

[Dukkha]

87. then I envy you

By far the worst company I've ever had the misfortune of working for. I'd do anything to get out.

[Chovexani]

96. 400+ people's jobs outsourced to Manila

Of course that's not what they actually called it. "Re-structuring". Our whole call center was wiped out, except for mortgage collections (for obvious reasons).

Fortunately I'm working a job that lets me sleep at night now. I only worked at Chase for 6 months but they are about the sleaziest credit card company around...I was "invited" to a town hall meeting on their new balance transfer policy rollout and I needed to take a shower after the marketing guys got up there and basically told us to lie and hide info from customers in order to make them go for the highest rate offers.

[Dukkha]

99. OOH the 'town hall' meeting are STEAMING piles of BS!

so insulting they think we actually fall for it. Like when they announced the opening of the Philippines call center because "we need advisers in that time zone to take late night calls." WTF! Never heard of a 3rd shift? (which is gone here now) So it has nothing to do with the pennies to the dollar wages you pay your third world slaves? They took my email queue dept, which had the highest customer satisfaction ever, and sent it to Mumbai which resulted in disastrous communications. But hey, they're a lot cheaper! Now they just made a "Best Customer" queue so they can 'observe spending habits of high volume cards.' In reality it's CEOs and celebrities getting preferential service were I've seen losses written off for them and lowest APRs and unlimited credit limitsbecause they're the "preferred customers"

[Chovexani]

103. We need to start a support group, I swear

Every time I find somebody that used to work at Chase it's like an outpouring of all the BS that ever happened there. It's cathartic.

That "Best/Valuable/Non-Profitable" shit used to piss me off like nothing else. And them forcing us to upsell Home Equity Loans right when the subprime crash was in full swing, encouraging the very same BS that got people into this mess. ("Take a vacation or buy a car with the equity in your home!" :puke:) I got written up because I refused to do it. My boss agreed that it was bullshit but his hands were tied.

Thing about Chase is, the individual people I worked with were awesome and it was a great environment in terms of friendliness toward LGBT and stuff (I was a member of PRIDE). The company itself was rotten to the core though.

Hang in there bro. :hug:

[JerseygirlCT]

81. That's sad to hear

My grandfather was oh so very proud of having spent his entire career there. Spoke glowingly of David Rockefeller... This was back in the very old days when a person literally could spend an entire work life at one place, and loyalty mattered - both ways.

How sad that this is where we are now.

[Lance_Boyle]

85. brava!!!

"If you allow a broker to knowingly inflate your income, then you ARE committing fraud."

:applause:

[Wednesdays]

9. This news needs to be spread far and wide

because the "conventional wisdom" out there is that the mortgage crisis is entirely due to stupid borrowers...that it's "all their own fault".

:eyes:

[Gormy Cuss]

23. Right, especially the idea that all of the income inflation was done by applicants.

To those of us who watch this field carefully the mortgage broker inflation of income and assets has been known for years, yet there are still many people who feel more comfortable believing that only greedy borrowers used stated income loan (AKA 'liar loans') this way.

The comment above about check stacking is another one ---some banks do engage in the practice of clearing checks in the order that will maximize bounced check fees, which is in direct contrast to the standard twenty years ago when they would clear the most checks with the amount of funds available. Why the change? Because the fees are almost pure profit.

[Lance_Boyle]

34. applicants in every case signed the documents with the inflated numbers

attesting to the information contained in them. Those applicants are not innocent in this. Unless, again, you expect me to believe that these applicants were all genuinely ignorant of what their actual incomes were versus what was stated in the loan docs. If they signed the papers with the inflated numbers, they committed fraud.

[Gormy Cuss]

39. If they provided the income information honestly and the broker changed it without their knowledge,

the broker committed fraud. The applicant is at best guilty of naivete.

I had a broker try to inflate my assets on a mortgage application because my self employment income was weak at the time. I made him correct it but it took three rounds with him trying to explain it away as my misunderstanding of the form. What he didn't know is that my professional background meant that I in fact DID understand it.

Bottom line, he was so used to puffing up assets that he did it automatically.

on edit: FYI, the broker was working for a medium-sized bank's mortgage subsidiary, not some small fly by night mortgage company.

[Lance_Boyle]

55. not so - they still signed the contract with the inflated number

so they are guilty of fraud. If I told my broker I made $50K annually, and then received a mortgage contract that said I made $500K annually, I would not sign the document, because I would be committing fraud by *knowingly* falsely attesting to my income. Given that the borrowers had a chance to review the documents to determine any errors (like inflated income), and then the borrowers had to sign the document attesting to the truthfulness of its contents, I don't see how it can be argued that these borrowers did not commit fraud.

[Gormy Cuss]

59. Perhaps you haven't seen the reports from around the country of last minute substitutions

of closing documents. Not all borrowers have the same level of sophistication about contract language and the ream of paper presented at closing usually has only a few pages tagged for signature. Without a lawyer those borrowers are at risk for being duped and many were. One can argue that having a lawyer at all closings is prudent, but it's neither the norm nor even encouraged especially for refis. As fasttense noted in an earlier post, some people assume that there is sufficient regulation to protect them in this process. It is correct that borrower is liable for the debt because s/he signed the documents but that's not the same as assuming a fraudulent intent.

Are there some borrowers who inflated their income or assets fraudulently? Sure.

[Lance_Boyle]

83. a closing attorney *is* the norm

and a last minute document switch means the closing is held up for hours while the new document is read and understood. Woe unto those poor suckers who thought that they didn't really need to read their contracts. It's their fault if the substituted wording is something they wouldn't agree to - they agreed to it by signing! Rule #1 of contract law - always understand what you are signing. I have no sympathy for those who somehow felt they were above this rule, and got fuckered.

[Gormy Cuss]

94. Uh, no. Closing attorneys aren't the norm in some states, CA being one of them.

The title company handles the closing. It's even hard to find a qualified and interested attorney to handle a primary residence closing. As an East Coast native there was no way that I was willing to buy a house without one but both the buyer and seller agents tried to tell us there was no need because of the stringent requirements in CA law. The title company employee assigned to us let out a deep sigh when I mentioned that we needed to check with our attorney before scheduling the closing. Those are my anecdotes but I've heard similar from many other transplants.

And I repeat: not everyone has the level of sophistication to understand that the wording was changed, not to mention have an understand of contract law. I for one would prefer that everyone was counseled to have an attorney or some other knowledgeable advocate at the closing. That would have save a lot of people from getting in over their heads.

[pitohui]

72. i had the same experience as gormy

brokers are paid on commission, if they are afraid you won't get the loan, they do play with the numbers

i don't know how you are committing fraud when you are following the advice of someone who is supposed to know how the game works and what counts as "assets" and what doesn't, i'm not a banker or a lender or a real estate agent or an appraiser, at some point i have to assume that people who do work in these fields know what they're doing -- and most of them aren't going to benefit if i default on my loan, so you'd figure they'd have a motive to color somewhat inside of the lines

if chase thought the consumers were committing fraud in taking out the loans, they'd prosecute them to switch the buck -- i don't see that happening except in exceptional cases where it's clear that a buyer intended fraud (invented a bogus W-2 form for example)

[Lance_Boyle]

88. You don't know how you are committing fraud if you make

$50K and knowingly sign a contract that says you make $500K??? Hard to believe.

[LynneSin]

41. Thank you for saying that

I'm not trying to take blame away from the Banks but just mentioning that buying a house is a two-way street.

I signed the papers for the loan I saw exactly what was put on my document for salary and I asked all the questions. My mortgage company insisted I could handle a mortgage about $75k higher than what I bought but I knew that this would not give me any chance to save money for 'rainy days' (Even with the mortgage I have, which was about $25k more than what I wanted to spend is pretty darn tight but I'm making due).

Sure, the banks did what they could to inflate the salary and offer more money. But why shouldn't they when they had consumers greedy wanting to buy McMansions and oversized, overprized vehicles.

If I had gone to the most i could mortgage I could have bought a house in an upscale address but instead I took the rowhome in a better neighborhood.

I'm not saying the banks aren't to blame but hell it's like allowing the driver of the Hummer to blame General Motors for their outrageous gas prices when the consumer knew going in there that these cars drank gas like a fratboy at a beer kegger.

[Lance_Boyle]

28. At the end of the day, borrowers signed the paperwork

with the inflated incomes and other fraudulent information. Those borrowers committed the fraud - it's their names on the contracts, which spell out the loan terms in black and white. So, now in addition to accepting that these simple-minded borrowers could not be expected to actually read the terms of their contracts, we are also to accept that they didn't really know how much money they make, and that the inflated figures on the documents bearing their signatures "looked right to them at them time?" No way. Your signature, your contract, your fraud, your fault, your loss.

[customerserviceguy]

10. I spent two decades in the title insurance industry

and there is no scum lower than a mortgage broker. And I have sleazy real estate agents and shoddy builders to compare them with...

[acmavm]

12. And yet these are the guys who we have to bail out. They are the

ones that deserve the public's money on a silver platter.

Talk about undeserved welfare.

[DaveJ]

13. I have a mild counterargument

It may make sense to inflate income in some cases if "Zippy" doesn't take into account human factors.

For instance, in the case of recent college grads (me), people often graduate with a lot of debt, and a low starting income, but depending on their ambitions, might have huge growth potential. Realistically, they might start off making $7/hr but have the potential to make 60-100K years later. Although these people might have great ideas for their future, "Zippy"'s algorithms may be inadequate. It's hard for a computer to analyze what a person's future earning potential is.

However, apparently these mortgage brokers are not hired based on their qualitative abilities. They can't discern between someone who plans to work hard and make more money in the future, versus all their fellow scam artists who merely know how to work the system.

The result is that we live in a system where hard work and ambition count for nothing, which then results in an economy going down the tubes, completing the downward spiral.

[alcibiades_mystery]

16. If you make $7 an hour, you don't qualify for the loan, period

Potential is potential. People loaning on potential are taking a much more severe gamble than people loaning on an actual salary.

In the old days, you'd walk in and say "I have the potential to make $60,000-$100,000 a year!" And the bank would day, "Good for you, kiddo. Come back when you land that job." This was safer for everybody, and better. All this squishy talk about "futures" and "potential" is what got us in this mess in the first place. At Enron, they called it "mark to market" accounting, where they declared ACTUAL profits over the long term based on the POTENTIAL revenue from contracts. It's bullshit.

You're not qualified for the loan. Period. Come back when you are.

Ambition DOES count for nothing when it is not yet REALIZED as concrete returns.

[Roland99]

18. Yeah, what's to stop that new grad from racking up MORE debt (car, credit cards, etc.) as well?

Prove the income. Don't be stupid and take a chance at ruining credit for years.

[dixiegrrrrl]

22. YYayyyy for your bumper stickers, Roland

I gotta get me some.

[Roland99]

53. cafepress!

[InkAddict]

51. That's the thing...

One can only prove one's income on the day of the proofing now days.

If you can prove you can afford the total price tag, one may as well just make an 30-year irrevocable deposit to the lender's bank of choice for the 30-year total of the loan plus their fees and for administration of the mortgage, i.e., the electronic number-crunching for payment performance. That should satisfy your "personal responsibility" nicely. That way, no employment proofing is needed at all.

If your lender then fails in it's fiduciary duties because its other investments went bad...well, I guess you were probably just negligent in choosing your lender.

[truedelphi]

66. I RELLLLY LOV the "If you voted for Bush" sticker n/t

[Tansy_Gold]

35. No, but if you make $11/hour, you do!

Way, way back in January 2006, long before anyone even thought there might be a housing bubble :sarcasm:, I applied for a $100,000 mortgage on a house appraised at $368,000 (EXACTLY the accepted offer on the house. . .the original asking price was $405,000.), with the balance in cash from the sale of my other house.

I wanted the house very badly but knew it was really out of my budget, solely because it needed extensive repairs and remodelling. I was not working at all at the time. Two major banks had turned down the application, so the realtor steered me to a mortgage broker. His advice: "Can you go out and get a job, any job?" I did; I got a temporary data entry job paying $11/hour. The first week, I worked four days; the second week five days; the third week two days.

On that basis -- three check stubs for 11 days' work -- the broker approved my mortgage, 30-year fixed at 6.5%, no balloon, no points, no fees, no nothing. I told him he was nuts. At $11/hour, even working full time, I couldn't have afforded the payments and had anything left to live on: groceries, utilities, gas to get to that $11/hour job. His comment, "Oh, we don't care about that. As long as you make enough money to make the mortgage payment, the rest is up to you."

I had enough experience to question this deal and to say a screaming "NO!" to it, but I know a lot of people who just plain don't have the background to understand the ramifications of a deal like this. They get suckered, and then they get blamed.


A recent college graduate who's making $7/hour needs to take stock of his/her situation. Work for a while, move up in the income department, save a little, AND THE MORTGAGE BROKERS SHOULD BE TELLING THEM THIS UP FRONT, not trying to sucker them into a mortgage they may or may not be able to pay. But it is a culture of greed out there.

Tansy Gold, not in the house of her dreams but at least this one is paid for

[Lance_Boyle]

89. Bravo/a on you for screaming NO!

Tell me, are you an accountant, or a Wall Street insider? Because from the tone of most of the posts here, those are the *only* people who can be expected to know how much money they make, or how much debt they can afford to take on.

The emptors in the country need a lot more caveat.

[Pierre.Suave]

63. good grief...

maybe you need to go back to school.

[PassingFair]

14. How well do you think an honest worker would fare in that environment?

Virtue had BETTER be it's own reward,
because it SURE isn't valued in today's
business environment.

Its hard to plod along honestly when the
scammers get all the money and the raises...

Maybe it's always been the case, but REALLY,
I think it's totally out of control.

[Speciesamused]

29. Truthful honest workers are not acceptable.

[PassingFair]

33. Oh, they keep us around, because we're reliable and somewhat...

predictable, but they don't promote us.

[Speciesamused]

37. You are an unusual case. I have been let go from jobs

because of speaking out. So have many, many others.
I am sure you have read about alot of the famous ones.
But especially women, as we are looked upon as 2nd class.
We are like a disease. No one wants to touch us because
they may loose their job too.
You are one of the lucky ones
Perhaps a man with connections. Peace

[pattmarty]

17. REGULATION, that is the key in ALL the financial mess we're in.

[peacetalksforall]

19. The hypocrisy which is the United States of America. -

Little people are expected to abide by every law. Corporations, foundations, politicians, government workers get to commit all the crimes. The grand crimes, those leading to death, destruction, despair. And as someone wrote - every crime has theft at its base.

Democcrats are expected to be saints in harangues by Republicans.
Republicans are perfect in the voice of Republicans.
The pounding of propaganda never ends.
The crimes never end.

The little people try. It's time for change.

[Lance_Boyle]

90. in cases where the broker adjusted income numbers

and the borrower subsequently agreed to the changes, then the brokers should be charged as accomplices to the borrower's fraud. The borrowers own the fraud because their names were signed on the dotted line.

[peacetalksforall]

21. Look at the motto of the OCC - Office-Comptroller -Currency

From the article - last paragraph:

"The U.S. Office of the Comptroller of the Currency has authority over Chase. OCC spokesman Dean DeBuck declined to comment on the document."

Their website - www.occ.treas.gov

Their Mission Statement:

"Ensuring A Safe And Sound National Banking System For All Americans"

The hypocrisy of life for all Americans?

[peacetalksforall]

30. Wait - Wait - me just missed it = our week to be protected -

"National Consumer Protection Week, March 2-8
Financial Literacy: A Sound Investment"

http://www.occ.treas.gov/consumer/ncpw.htm

[Summer93]

25. Current reality

I am reminded about something said by *Bush* folks - while you are investigating what has happened we will be creating a new reality and you will investigate that.

It appears that *Bush* has created a new reality here. When a business fails they are bailed out by the federal gov. (taxpayers) and when an individual fails the individual is held accountable. Lying, cheating, stealing the new reality at the top level.

It looks as though deregulation is a failed reality. Now we understand why regulation was put into place in the beginning.

[Speciesamused]

26. That is what this administration stands for.

Lies, Cheats and tricks. With no accountability.
The American people have been
treated to a 7 year magic show.
That has turned into a financial apocalypse.
King George sits on his thrown with his maniacal grin,
protecting his corrupt minions. While his people
have become destitute.

Long Live the King!!!!! :sarcasm: :sarcasm:

[DeepModem Mom]

27. K&R

[lovuian]

31. Greenspan gave them free and easy money

the banks were having a field day

[Broadslidin]

43. Tis a Good example of the Imperial U.S. business ethic.....

And in the spirit of this land's sixteenth century
bloody revolution fronted by Feudal land holders,
fighting against imperial foreign corporations,

I am in awe of the Brave Iraqi Freedom Fighters.

[snappyturtle]

56. This inflation of income happened to my daughter in 2005.

Unfortunately, we figured it out ex post facto...her life has been hell hanging on. Chase can deny this but it has happened. From the scope of our economic problems, I would guess this practice was frequently used. In my daughter's case the illegal practices were enhanced by her realtor's offer to "help" with the down payment! I want these people brought to justice.

K&R

[Lance_Boyle]

91. Que?

You mean your daughter signed a contract that said her income was something other than what she knew it to be? Heavens! Your daughter committed FRAUD! She had the contract before her that stated her income - if she knew what her income was, and it was different from what the contract said, then SHE SHOULD NOT HAVE SIGNED THE CONTRACT! How hard is that? Be honest when you sign a contract. Tough fucking luck to those who aren't.

[snappyturtle]

100. I have never said this to anyone on DU before...but, screw you!

She had so many papers to sign, her mortgage is unlike any I have EVER seen. I have bought eight homes and been a realtor so I know of what I speak. IF you could find her stated income on the papers more power to you. You don't know the extent of coercion that existed...I do.

[The Straight Story]

57. Damn - I Put the zippy system in at Chase (the disaster recovery one)

The main one was in the way of a hurricane and they had not previously thought to have all those systems also online elsewhere.

[flashl]

60. K&R

[Adsos Letter]

67. And taxpayers are supposed to bail these institutions out when their practices result in failures...

:wtf: ...I say bullshit to that... :grr:

[fascisthunter]

75. I Can't Believe Folks are Literally Accusing Folks Of Knowing

what they are doing. Its a big assumption to make that those being defrauded willingly and knowingly allowed themselves to be defrauded.

"Yes, please fuck me over... thank you, may I have another?" Puhleeeease.

No... but what we do know by reading this article is that banks are knowingly and purposefully fooling folks into defrauding themselves.

[Lance_Boyle]

92. more like, "yes, I know I really can't afford this house, but"

c'mon - contract law is basic shit - if you read the contract, and you see that it is inaccurate, DON'T SIGN IT! Too many people were too greedy for what they got by signing those contracts. I want *that* house, and I want it *now!* Don't care if the contract says I make more than I do... I want that HOUSE. NOW!

Banks are enabling, but the borrowers are defrauding. Shame on both, but penalty on those who falsify their incomes on legal contracts. Shame and foreclosure.

[fascisthunter]

93. Sorry..... Nobody Knows They are Getting Screwed

before they sign the dotted line. That's BS. To say they knowingly allowing themselves to get screwed without knowing these people or their education level is just giving banks a pass in screwing people. You sound too eager to judge a lot of people you don't know.

But per this article and others we DO KNOW BANKS PURPOSELY LIE AND DO SCREW PEOPLE. I don't blame the victim... I don't pretend to know exactly what was said to them that gained their trust to sign the dotted line as you seem to have. Good luck in trying to convince others...

[Lance_Boyle]

104. the "victims" are given complete information in black and white

in the form of a legal contract that they choose to sign. If they are not responsible enough to read that contract before signing it, then they are not victims, they are ignorant buyers and poor decision makers, and they will get burned for it.

[Occulus]

106. In what form, on the forms, do you assume their reported income was stated? n/t

[snappyturtle]

101. You bet! I got one of those snarky answers to my reply #56...so

I answered in kind! I was amazed what my daughter, 27 years old at the time, was told. She was a first time home buyer and had nothing to compare this too and unfortunately, we live a long away apart.

[Jack Rabbit]

97. Chase "never encouraged any suggestions in the memo"

Then why make suggestions in a corporate memo? Shouldn't the memo have said something like "these are things we don't do and we suggest you don't do them."

As for mortgage brokers calling it vindication, that's a lot of baloney. When I bought a house in the eighties, I was called by the mortgage lender and the real estate salesman strongly encouraging me to tweak my income by a small amount. I expressed distate for the idea, but finally gave in when I got a call from She Who Must Be Obeyed. Mortgagte brokers, lenders, real estate agents and home buyers were all in on this and all share some blame. Let's not try to kid anybody.