State hand strengthened in house `flipping' cases

Bill gives more power to regulators in policing mortgage brokers, lenders

April 12, 2000|By John B. O'Donnell | John B. O'Donnell,SUN STAFF

Trying to deal with property flipping in Baltimore, the General Assembly session that ended Monday adopted legislation to strengthen the ability of state regulators to police mortgage brokers and lenders.

But legislators derailed bills to make public more quickly information on city property sales and to require licensing of all real estate appraisers.

More than 2,000 houses have been bought and quickly resold in Baltimore in the last four years for price increases of 100 percent or more.

Often, inflated appraisals and falsified loan documents were used in illegal deals that defrauded buyers and lenders.

The new powers for state regulators drew an enthusiastic response from Mary Louise Preis, state commissioner of financial regulation, whose agency licenses and oversees more than 2,700 mortgage brokers and lenders.

Along with the power to regulate licensees, the commissioner got more than $400,000 to hire additional staff.

Among other things, the legislation allows Preis to quickly obtain cease-and-desist orders to stop illegal activity and to impose civil penalties for violations of the law. It also requires her agency to examine the work of each lender and mortgage broker at least once every three years.

On average, each company is examined every five years. Preis said she will focus examinations on detection of fraudulent loans by targeting lending in areas where flipping has been widespread.

The bill to require appraiser licensing fell victim to a lobbying campaign by the state bankers association, which claimed it would increase the cost of loans. Now, many transactions, such as loans insured by the Federal Housing Administration, require licensed appraisers. More than 2,300 appraisers voluntarily get state licenses, but officials estimate that 500 others are not licensed.

Harry Loleas, associate commissioner of occupational and professional licensing, said officials were unable to give legislators "tangible evidence of misconduct by unlicensed appraisers."

Also derailed was a bill aimed at more quickly making public information on city property sales so buyers could find out if their houses had been recently acquired by the seller.

It takes the city as long as two months to get sales data onto the World Wide Web. A measure to transfer that responsibility to the State Department of Assessments and Taxation died after city officials asked for time to improve their performance.

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