Home `flips' draw eye of governor

He pledges to work with legislature to end housing practice

`Everyone loses'

Delegates propose disclosures to buyers, appraiser regulations

January 08, 2000|By John B. O'Donnell | John B. O'Donnell,SUN STAFF

Expressing outrage at rampant property flipping in Baltimore, Gov. Parris N. Glendening pledged yesterday to work with the General Assembly to try to end the practice.

"Some very unscrupulous people are making money on the backs of the poor and people struggling to own a home," Glendening said after a half-hour meeting with two Baltimore delegates who are drafting legislation aimed at ending the practice.

In the past four years, more than 2,000 sagging Baltimore houses have been bought and quickly resold for at least double the original price. Often, buyers are low-income, first-time homeowners who end up with a mortgage that is more than the value of the house. They frequently default on the loan and abandon the property.

"The bottom line is, it's a terrible and outrageous situation," Glendening said. "Everyone loses. The community loses because it ends up with an abandoned house. The homeowners end up losing their house and credit. The legitimate banks and mortgage brokers lose.

"The only one who gains is the person who is doing the nefarious acts."

Two Baltimore Democrats, Del. Samuel I. Rosenberg and Del. Carolyn J. Krysiak, sought the meeting with Glendening to ask for support for various proposals aimed at ending flipping. They emerged without commitments on specifics but convinced that they have the governor's support in tackling the problem.

"There was a clear commitment to address this problem," said Rosenberg, chairman of the Health and Human Resources Subcommittee of the House Appropriations Committee. "He clearly recognizes that there is a serious problem."

Krysiak, who heads the housing subcommittee of the House Economic Matters Committee, added, "He seemed to have a good understanding of the impact on communities."

The Economic Matters Committee will take up the issue shortly after the General Assembly opens its session Wednesday. The committee has scheduled a briefing for Jan. 18 to hear from officials of public agencies and private nonprofit groups that have watched the practice closely.

The committee's decision to hold the meeting on flipping early in the session means "this has become a major issue," said Krysiak. But she added that many legislators don't understand the problem.

Krysiak and Rosenberg asked aides to begin researching possible legislative solutions after The Sun reported in August that flipping is widespread in Baltimore. In addition to first-time homebuyers, some of the victims have been first-time investors who have bought more than one house -- sometimes as many as 20 -- in the belief that they would make money as landlords. Often they default on their loans and file for bankruptcy.

The two delegates haven't completed the details of their proposals, which are aimed mainly at sales to homeowners, not landlords. They said yesterday that they expect to introduce measures to require:

Increased regulation of appraisers, whose inflated valuations of properties have enabled flippers to sell houses for more than they are worth. Currently, appraisers do not have to be licensed in Maryland unless the transaction involves federal funds or guarantees. Krysiak and Rosenberg want to require licensing of all appraisers and to see increased regulation of the profession.

Require disclosure to the buyer of the most recent sale of the house and the price.

Require that the buyer be given a copy of the appraisal.

State investigations

They also want more money for state investigations of flipping. Attorney General J. Joseph Curran Jr. has begun a probe using legal fees that the state collected in its settlement with tobacco companies.

"I enthusiastically support Joe Curran's criminal investigation," said Glendening.

Krysiak and Rosenberg want increased state funding for nonprofit groups to purchase, rehabilitate and resell houses that have been left vacant after buyers stop making payments and lenders seize the houses.

They also are asking Glendening to provide additional state subsidies for nonprofit housing agencies to counsel first-time homebuyers. They want to make counseling -- as well as an analysis of the deal by a counselor -- mandatory if public funds are involved. Occasionally, buyers of flipped properties have received subsidies available to first-time homebuyers.

Help for homebuyers

Glendening said he wants the state Department of Housing and Community Development to seek ways to increase administrative assistance for homebuyers.

"Normally, someone who is buying a house is represented by a Realtor or an attorney," the governor said. "These individuals who are desperately looking for a house don't have that kind of representation."

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