The idea that the big banks played little or no role in the mortgage mess should now be considered thoroughly debunked.
Joe Nocera's mortgage broker documents, the 2005 'Simply Signature' mortgage ad, and the fixed income outlook document mocking the housing bubble should be enough to persuade anyone that the banks were major players.
But just in case there is a little doubt left over, we're thought we'd point out a memo that first surfaced in 2008. It was sent around between a number of Chase employees, and uncovered by the Oregonian. It explained how mortgage brokers should 'cheat' and 'trick' ZIPPY, Chase's automated mortgage system into approving stated income, stated asset loans.
If all else fails, the memo explains, 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.”
Chase has denied that this was an official memo, and at least one employee was fired for distributing it. Chase stopped making SISA loans in 2007. But it nonetheless illustrates that the loose lending was alive and well inside of the biggest banks. With mortgage bankers typically paid commissions on loans, oan volume became as important as loan quality, particularly for the rank and file typically paid on commission.
Here's the text of the memo:
ZiPPY Cheats & Tricks...
If you get a “refer” or if you DO NOT get Stated Income / Stated Asset findings.... Never Fear!! ZiPPY can be adjusted (just ever so slightly)
Try these steps next time you use Zippy! You just might get the findings you need!!
• Always select “ALTERNATE DOCS” in the documentation drop down.
• Borrower(s) MUST have a mid credit score of 700.
• First time homebuyers require a 720 credit score.
• NO! BK’s OR Foreclosures, EVER!! Regardless of time!
• Salaried borrowers must have 2 years time on job with current employer .
• Self employed must be in existence for 2 years. (verified with biz license)
• NO non-occupant co borrowers.
• Max LTV/CLTV is 100%
Try these handy steps to get SISA findings . . .
1) In the income section of your 1003, make sure you input all income in base income. DO NOT break it down by overtime, commissions or bonus.
2) NO GIFT FUNDS! If your borrower is getting a gift, add it to a bank account along with the rest of the assets. Be sure to remove any mention of gift funds on the rest of your 1003.
3) If you do not get Stated/Stated, try resubmitting with slightly higher income.
Inch it up $500 to see if you can get the findings you want. Do the same for assets.
It’s super easy! Give it a try!
If you get stuck, call me . . . I am happy to help!