IndyMac to Eliminate Use of VOD, VOE

January 14, 2008 No Comments »

According to a memo sent to mortgage brokers, IndyMac will no longer accept a VOD or a VOE to verify assets and income for broker-originated deals.

Typically, banks and mortgage lenders will allow borrowers to verify assets by providing bank statements or a Verification of Deposit, but it appears the latter method is likely leading to a higher level of mortgage fraud, as it can be easily manipulated.

Effective 5:00 p.m. today, the Pasadena-based mortgage lender will now require two months of bank statements for asset documentation.

The company will also be eliminating the use of a Verification of Employment in lieu of W-2’s and/or tax returns for full-documentation loans.

Some lenders allow a borrower’s employer to fill out a form proving job title and income, but these too are highly susceptible to fraud.

In recent months, IndyMac has tightened underwriting guidelines in a number of areas, eliminating all “No Ratio” and “NINA” products across the board, and limiting “Stated income” on jumbo loans to 75% max loan-to-value.

The bank also said in mid-December that it would dump its hybrid option-arm loan program.

The changes come as delinquencies continue to rise in IndyMac’s loan portfolio, according to financial results revealed last week.

The company said 30+ day delinquencies in its prime first-lien loans (which account for 93.5% of the total servicing portfolio) increased from 5.80% in October to 6.25% in November.

And subprime 30+ day delinquencies rose to 26.87% in November, compared to 24.43% in October, though subprime loans comprise of only 2.8% of their total servicing portfolio, and have since been completely discontinued.

It is believed that an official guideline bulletin regarding the changes will be released tomorrow.

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