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JPMorgan's "Cheats & Tricks" memo

Posted by: Peter Coy on October 3, 2008

The deepening of the financial crisis has led to a new round of finger-pointing. The blame game can go too far, of course, but on the whole I think it’s healthy for a society to pause and figure out what went wrong before it blunders ahead. As George Santayana said, those who cannot remember the past are condemned to repeat it.

With that philosophical preamble, allow me to point you to an excellent article that appeared last March in The Oregonian newspaper. It exposed a memo by someone inside JPMorgan Chase (we still don’t know who) instructing lending officers how to commit fraud and get loans approved by the bank’s computer, known as Zippy.

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.

Hat tip to Barry Ritholtz, who mentioned The Oregonian piece in an Oct. 2 blog post.

Reader Comments

Barry Ritholtz

October 3, 2008 9:26 AM

I first mentioned that back in March, when I was in the latter stages of researching the housing portion of the "Bailout Nation" book -- coming to a bookstore near you around 2012 at the current rate of new bailouts!


October 6, 2008 1:53 AM


I think its a brilliant idea that this article is giving us. It is a primer on how to get risky mortgage loans approved by Zippy.



October 6, 2008 6:09 PM

Last time I checked, fraud was a crime. The loan officers who engaged in this practice should face criminal charges.

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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