FRAUD DETECTIONAND PREVENTION RED FLAGS

1 FRAUDDETECTIONANDPREVENTIONREDFLAGSF raud Detection and PREVENTION 2 At Chase, we recognize that in today's market, taking advantage of every opportunity to minimize the risk of mortgage FRAUD is the key to PREVENTION . As an industry leader, we feel strongly about the actions we are taking and are dedicated to the PREVENTION of FRAUD . As part of our FRAUD PREVENTION initiatives, we have developed a list of red FLAGS that may indicate FRAUD . You can enhance the Chase experience by closely reviewing the completed Loan Application (1003) and supporting documentation for consistency, accuracy and the presence of mortgage FRAUD red FLAGS prior to submission. Mortgage FRAUD red FLAGS do not necessarily indicate FRAUD , but they help identify the need to perform a heightened review of the loan file for data integrity.

2 Application Documentation Loan Application (1003) An unrealistic or significant commuting distance (compare the distance between the employer and the new property vs. the distance between the employer and the former residence) Inconsistencies in the borrower s age and the number of years employed An unrealistic professional position for the age or education of the borrower Job title and responsibilities inconsistent with high salary Identical business and home phone numbers when borrower is not self-employed An unreasonable accumulation of assets compared with the borrower s income, or a lack of accumulated assets compared with income Post Office Box is only indicated address for employer Borrower cannot be reached at place of business Stocks and bonds (liquid assets)

3 Are not publicly traded (may be closely-held corporation) Borrower holds stock in employer (may be self-employed) Borrower is buying investment property but does not own a primary residence Borrower has acquired an excessive amount of real estate in a short period of time Borrower owns excessive amount of real estate but has limited property management experience Borrower is downgrading to a smaller or less expensive home without reasonable explanation Borrower is intending to rent current residence with no lease provided, or lease provided is incomplete or inaccurate Borrower intends to sell current residence, but no documentation is provided Information on the loan application and supporting documents in the loan file are inconsistent Signatures on the loan application are not consistent with other documents provided or eventually signed by the borrower Use of Power of Attorney FRAUD Detection and PREVENTION 3 Social Security Numbers and Social Security Cards The formatting of the Social Security number should always be nine digits and appear as xxx-xx-xxxx.

4 Invalid Social Security numbers are any numbers that: Begin with three or more zeros (000-36-0172) Have both fourth and fifth digits of zero (135-00-0172) End with four zeros (135-36-0000) Lead with numbers of 700-728; these numbers were issued to railroad employees and were discontinued July 1, 1963 Lead with number 8 Lead with number 9; this indicates an Individual Tax Identification Number Since 1973, Social Security numbers have been issued by the central office of the Social Security Administration. The first three (3) digits of a person's Social Security number are determined by the ZIP Code of the mailing address shown on the application for a Social Security number.

5 Prior to 1973, Social Security numbers were assigned by the field offices of the Social Security Administration. To access the chart showing the first three digits of the Social Security numbers assigned throughout the United States, visit Occupancy Borrower owns rental property and the value of their current residence is greater than the value of the residence being purchased Within the last three years, borrower purchased property that was later rented Within the last three years, borrower purchased similar property and occupied that property for less than one year Borrower is a real estate professional and is moving from 1-unit property into a 2- to 4-unit property Within the last twelve months.

6 Borrower purchased a property represented as owner-occupied in the same or a similar neighborhood Home being purchased is an excessive distance from primary employment Home being purchased does not appear to be a desirable alternative to existing primary residence Borrower has no commitment to selling or leasing borrower s current primary residence ( , no listing or purchase agreement on the current residence) Inconsistencies between question L of the Declarations Section and the Property Information Section of the 1003 Subject section of the appraisal shows occupant to be a tenant FRAUD Detection and PREVENTION 4 Income Documentation Red FLAGS IRS Form W-2 and Form 1099 Employer is a large, recognizable company, but W-2 and 1099 are not computer-generated W-2 appears typed but pay stubs are computer-generated Different type or font appears within W-2 or 1099 Federal Employer Identification Number does not appear on document.

7 Every partnership, corporation and proprietor paying wages to one or more employees must have a Federal Employer Identification Number Employer Identification Number is not formatted as XX-XXXXXXX (two digits, hyphen, seven digits) Employer and employee names and addresses are inaccurate and/or do not match the 1003 W-2 or 1099 reflects even dollar amounts for wages and/or taxes Income reflected on the W-2 or 1099 is different than income reported on loan application, Verification of Employment and tax returns Social Security tax and Medicare wages/taxes and local taxes, where applicable, exceed ceilings or set percentages Tax withholdings are inconsistent with pay stubs provided W-2 or 1099 copy submitted is not Employee s Copy (Copy C)

8 Borrower s Pay Stubs Form is handwritten Employer is a large, recognizable company, but pay stub is not computer-generated Company name or employee name not shown Document contains spelling or typographical errors Types or fonts are inconsistent throughout document Check numbers do not increase chronologically Paycheck was issued on a Sunday or a holiday Document shows even dollar amounts for earnings, taxes and/or deductions Amounts withheld for Social Security, Medicare and other government programs are inconsistent with the level required State tax is not deducted, where applicable Debts reflected as deduction from pay (credit union loans, etc.) are not disclosed on application Year-to-date earnings do not total accurately from paycheck to paycheck Social Security number is not consistent with number provided on other loan file documents Employee s address does not match address on 1003 IRS Tax Form 1040 Name, address.

9 Social Security number or occupation is not consistent with application Number of dependents does not match 1003 Tax returns do not total correctly Wages are not consistent with W-2 or Verification of Employment Business income does not match net income found on Schedule C Unemployment compensation was claimed but the file does not indicate a gap in employment or seasonal employment Deductions were made for one-half of self-employment tax or for self-employed health insurance for a borrower who is not self-employed Deduction for one-half of self-employment tax on page one of 1040 is not one-half of total self-employment tax listed on page two of 1040 Borrower files Schedule G (Income Averaging)

10 For taxpayers with fluctuating annual income Borrower shows extensive common stock, preferred stock or bonds on the 1003, but little dividend or interest income reported on tax return FRAUD Detection and PREVENTION 5 Borrower claims to own no real estate, but tax return reflects real estate taxes or mortgage interest There is evidence of correction fluid or other alterations to type Type of handwriting varies within the return Tax returns are not signed and dated by borrower Paid preparer handwrites tax return Leases Borrower is shown as landlord prior to owning property Lease is dated prior to the revision date found on the lease form Names on lease are the same as or related to other parties involved in the transaction Asset Documentation Red FLAGS Asset Account Statements Statement reflects large.