The Back Alley Archives

Shady, shady business.

2008-03-28T12:06:13-05:00

You want shady business? Check this out:

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.

The document, a copy of which was obtained by The Oregonian, bears a Chase corporate logo. But it's unclear how widely it was circulated or used within Chase.

Bank spokesman Tom Kelly confirmed that the "Cheats & Tricks" memo was e-mailed from Chase but added that it does not reflect Chase corporate policy.

(...)

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.

"Never fear," the memo states. "Zippy can be adjusted (just ever so slightly.)"

The Chase memo deals specifically with so-called stated-income asset loans, one of the most dangerous of the mortgage industry's innovations of recent years. Known as "liar loans" in some circles because lenders made little effort to verify information in the borrowers' loan application, they have defaulted in large number since the housing bust began in 2007.

(...)

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."

Chase's Kelly said the bank has never encouraged any of the suggestions in the memo.

Read the whole thing here: http://www.oregonlive.com/business/oreg ... thispage=1

Statistics: Posted by a1bion — Fri Mar 28, 2008 12:06 pm

Shady, shady business.

2008-03-20T14:52:36-05:00

OH, I see..thanks for clarifying...Armpit, USA needs to open a theme park! LOL. But seriously, some of these smaller places COULD benefit from the local residents who can't go far from home for their vacations and entertainment. Instead of that Texas family going to Disney they will stay close to home and go to Six Flags...or go to their local movie theater...OR go to their local Spa! [img]{SMILIES_PATH}/icon_wink.gif[/img] I'm not saying its going to work in every small town in America or that everything is smelling like roses or anything...just throwing out that concept.

Statistics: Posted by G8rMom7 — Thu Mar 20, 2008 2:52 pm

Shady, shady business.

2008-03-19T22:45:24-05:00

meaning disney and traditional global travel destinations in the states will benefit from the cross currency exchange...heck - local laws are starting to prohibit the sales of cars to canadians coming across the border only to drive it back...we're learning of reports of foreigners taking advantage of currency relationships and buying properties in droves as they are at an advantage to do so...i'm fully aware of the currency advantages (and disadvantages as far as i'm concerned as i will be traveling abroad to south africa early next year)

my point is that local economies of global destinations will benefit from the cross currency arbitrage that you mention...places like disney, nyc, the sonoma and napa valleys, the french quarter during mardi gras, etc...how would armpit, usa benefit from the currency plays if no one from abroad is visiting....not every state/county/district has a disney.

Statistics: Posted by radbag — Wed Mar 19, 2008 10:45 pm

Shady, shady business.

2008-03-19T19:37:16-05:00

^^^What does that have to do with what I said? I admitted that there are plenty of Americans who will not be going to Disney or other tourist attractions that are far from home...but I was talking about foreign tourists whose money is now worth more here. They will be coming to NYC too, BTW.

Statistics: Posted by G8rMom7 — Wed Mar 19, 2008 7:37 pm

Shady, shady business.

2008-03-18T22:08:02-05:00

I laugh when it read that the gas prices have increased slowly? I know that 5 years may seem like an eternity to someone in their early 20's, but when I bought my first NEEDED minivan about 5 years ago, I remember being upset because gas started to get more expensive...it went up to around $1.65 a gallon! So in 5 years, that has doubled...I think that is a dramatic raise in price. The only thing that compares is the cost of my healthcare.

But I agree with TT when he said for every time Rad quits getting his massage there will be others there to get a massage. Especially all those foreign tourist who will be more likely to come to America for that trip they always dreamed of...why? because their money is worth more! They will be keeping a lot of the service industries and tourist industries in business...Or there is hope that they will help at least provide some relief to the lack of US domestic customers.

not everyone has disney in their backyards...

Statistics: Posted by radbag — Tue Mar 18, 2008 10:08 pm

Shady, shady business.

2008-03-18T22:01:43-05:00

that's my point m7, the huge jump happened after Katrina and the damaged refining plants.

Statistics: Posted by MinGator — Tue Mar 18, 2008 10:01 pm

Shady, shady business.

2008-03-18T21:33:26-05:00

I laugh when it read that the gas prices have increased slowly? I know that 5 years may seem like an eternity to someone in their early 20's, but when I bought my first NEEDED minivan about 5 years ago, I remember being upset because gas started to get more expensive...it went up to around $1.65 a gallon! So in 5 years, that has doubled...I think that is a dramatic raise in price. The only thing that compares is the cost of my healthcare.

But I agree with TT when he said for every time Rad quits getting his massage there will be others there to get a massage. Especially all those foreign tourist who will be more likely to come to America for that trip they always dreamed of...why? because their money is worth more! They will be keeping a lot of the service industries and tourist industries in business...Or there is hope that they will help at least provide some relief to the lack of US domestic customers.

Statistics: Posted by G8rMom7 — Tue Mar 18, 2008 9:33 pm

Shady, shady business.

2008-03-18T19:55:58-05:00

what has also been left out of the oil discussion is not so much the supply of crude but our oil companies ability to refine the product. at this point you might drive down the price of crude with increased production by OPEC or by drilling in alaska (which i agree, we should be doing), but imho we would see some relief but not drastic price drops at the pump. our country's process for permitting the construction of new oil refining capability is essentially non-existent. the cost and time are astronomical even for big oil. this country has basically been operating with roughly the same refining capacity for a really long time and then take the Katrina effect where many refining plants were severely damaged and you get big jumps at the pump. the price of oil has skyrocketed from what $60 to $70 a barrel to over a hundred and the price at the pump creeps up. Katrina reduces refining capacity and the price jumped $1+ a gallon overnight (i realize there were a lot of factors in this including loss of production, but the biggest contributor was refining).

the NIMBY's need to learn that it has to happen somewhere, so don't even get me started on nuclear plants.

ok, off my soap box now.

Statistics: Posted by MinGator — Tue Mar 18, 2008 7:55 pm

Shady, shady business.

2008-03-18T15:40:14-05:00

The US has ever seen hyper-inflation like what you described. 13% around 1980 I believe was the highest in recent history. 14% in 1947 and 15-17% in 1917-1919.

We are running around 4% inflation right now. You normally want 1-3%

Statistics: Posted by TheTodd — Tue Mar 18, 2008 3:40 pm

Shady, shady business.

2008-03-18T15:34:06-05:00

The weak-ass dollar and the inflationary risks that go with it scares me the most. When I worked in Yugoslavia inflation was rampant. The dinar had just been devalued by a million times or something just before I arrived there. The first week a bottle of beer cost about $7000 dinar, the next week it was 15,000. When I left about 12 weeks later it was costing about 78,000. Needless to say the locals were desperate to trade with me for any currency other than their own (though it was illegal under the then communist rule). Of course that is extreme inflation which I would hope not to see here. What are the highest levels of inflation that the United States has encountered?

I think the other thing that scares me is that with a weak dollar the export market should be good for the US but we don't seem to have a strong manufacturing base anymore. Everything is service industry driven.

Statistics: Posted by Welshgator — Tue Mar 18, 2008 3:34 pm

Shady, shady business.

2008-03-18T14:59:10-05:00

No one has weighed in (directly at least) on what I consider the real driving force behind the rise in oil and other commodities:

The weak-ass dollar.

And its only going to get weaker and weaker as helicopter Ben slashes the Fed Funds Rate.

Statistics: Posted by Tipmoose — Tue Mar 18, 2008 2:59 pm

Shady, shady business.

2008-03-18T13:29:20-05:00

Well, not just the price of oil in the production of products but the transportation costs that increase when having to drive/fly/rail items throughout the nation.

Statistics: Posted by TheTodd — Tue Mar 18, 2008 1:29 pm

Shady, shady business.

2008-03-18T13:19:59-05:00

Now your talking Todd. Inflation is such a tricky fucking thing. I agree that oil is so important in the manufacturing of many products and THAT argument holds more water here then the price at the pump.

Statistics: Posted by TTBHG — Tue Mar 18, 2008 1:19 pm

Shady, shady business.

2008-03-18T13:16:31-05:00

Minute yes, but it is one of those issues that increases the costs of many products across the board and with that could lead to higher than normal inflation and that is what is feared.

Statistics: Posted by TheTodd — Tue Mar 18, 2008 1:16 pm

Shady, shady business.

2008-03-18T13:14:43-05:00

this is the point, TT...a lot of consumers have gotten used to the lower price of gas here, what is spent in other countries be damned. your point on the satellite TV, cell phone, massages, haircuts, etc..is precisely the point. All luxury items...gas prices rise, less money for luxury goods, less luxury goods bought, worse for the economy.

i'll be honest and i'm not trying to be stupid cause we've got a GREAT FUCKING discussion going but if gas gets to the point by which i can't get a massage every month, i aint gettin one...i'm not going to the restaurants either if heating oil prices continue to skyrocket....and i'm not going on vacation if the costs of goods and services continue to rise based on energy costs being passed down to the consumer...who hurts? the state/city/county i am not vacationing at because i can't afford to....the massage therapist who does this on the side to pay for college....the waitress who relies on tips to pay for gas

For every guy that can't go on vacation or to the masseuse because of gas prices, there is another guy who just got a bonus or a raise who will go in your place. It is a vicious cycle but I maintain, all the bitching notwithstanding, that fuel prices rising is such a minute part of the economy.

Statistics: Posted by TTBHG — Tue Mar 18, 2008 1:14 pm