No, nothing to do with Bear. Rather, a memo circulated among Chase staff in the states called “Zippy Cheats and Tricks” offering tips on how to get dodgy loans approved through the bank’s in-house automated loan underwriting system (zippy).
As reported by the Oregonian:
“Never fear,” the memo states. “Zippy can be adjusted (just ever so slightly.)”
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.”
The memo deals specifically with stated-income asset loans (known also, tellingly, as “liar loans”) which Chase no longer offers. It’s still a pretty stunning indication of the origins for subprime lending, however.
More importantly, of course, it’s from a big bank. The policy may not have been official, but it’s certainly one in the eye for Wall Street’s efforts to blame local mortgage lenders for the subprime mess.
The memo has been passed on to SEC officials.
(HT Calculated Risk)