Chase Originator Pleads Guilty -$33M

Former Chase Mortgage Originator pleads guilty to fraud costing Chase $33 million!

How the Fraud Happened:

Underwriters base approvals, as well as interest rates and loan amounts on the amount of risk inherent in a loan application. That risk has traditionally been calculated on the 5 C’s of credit underwriting:

1. Capacity – or enough income to repay the loan
2. Character – the stability of the borrower or borrowers. This includes how long they have resided in one place, how long the borrower(s) held jobs etc.
3. Credit – per the credit reports, do the borrowers repay their existing debt as agreed? Is there credit deep (have some accounts that were established for several years) and wide (have a variety of credit accounts, all of which are paid as agreed)?
4. Collateral – The property you are buying is also the collateral for the loan. If you default on the note, the lender will foreclose on the property. Property value is discovered by an appraisal of the property – a report of the house’s features and its marketability based on sales of similar homes in the same area. Also, a primary residence is less risky collateral than an investment property.
5. Capital – enough net worth, cash reserves to cover repaying the loan should the cash flow be inhibited.

If any of these five areas are deficient, the lender may reduce the amount of the mortgage loan offered, or the interest rate charged on the mortgage loan.

The Mortgage Fraud Case:

To knowingly change the information on a mortgage loan application is to perform mortgage fraud. In This case, the fraud was a tool to keep the loan approvals coming from underwriting. Former senior loan officer, Ross Pickard, at JPMorgan Chase Bank admitted in court that he participated in a massive mortgage fraud that cost Chase bank over $33 million.

Between Jan 2006 and July 2007, Mr. Pickard performed this fraud by picking buyers who had good credit scores, and completing, certifying and submitted falsified mortgage loan application with the rest of the underwriting information. That means 4 of the 5 risks such as true: income, assets, liabilities and property occupancy were fraudulently reported when submitting mortgage loan applications on behalf of the borrowers.

Mr. Pickard was indicted in January 2017 following an investigation by the Federal Housing Finance Agency – Office of Inspector General and the Internal Revenue Services – Criminal Investigations Division.

The Deal:

Pickard faced up to 5 years in prison for the conspiracy count, and up to 30 years on EACH of the fraud counts. Because a plea agreement was reached, Pickard now faces a maximum sentence of five years.

Chase released a statement to HousingWire.com stating: “This was an isolated incident involving a former employee nearly ten years ago. Any customer issues have since been resolved and we’ve been fully cooperative with the government in their investigation.” If you feel your mortgage may have been similarly handled, Contact us today to learn about your options.

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