Day of reckoning

Flipping: Federal flipping charges could help weed out nefarious lending practices in Baltimore.

April 30, 2001

OWNING A HOME can be the start of a nest egg. Millions of Americans trace their financial security to a home that has appreciated over the years.

The opposite also is true. Countless Americans have gotten in over their heads because of a bad or ill-informed home purchase.

Over the past year, stories by Sun reporter John B. O'Donnell have focused on a speculative disease - property flipping.

This is the pattern: An unscrupulous investor buys a property for, say, $45,000. He then strikes a deal with an unprincipled appraiser who values the home at $80,000. The property is then "flipped" to an unsuspecting buyer, who is saddled with an inflated mortgage. When the buyer defaults, the Federal Housing Administration, which guaranteed the loan, is left holding the bag.

This scam has reached epidemic proportions in Baltimore. Just look at the number of foreclosure auction ads. But Mr. O'Donnell's exposes are also producing results. Just last week, federal prosecutors charged 16 Baltimore-area residents in connection with alleged flipping illegalities.

Baltimore has been one of the hardest-hit cities in flipping frauds that have been uncovered throughout the nation. Some of the accused flippers are small-timers, but in New York a mobster is being prosecuted as a ringleader.

The latest prosecutions should help curtail this nefarious practice here.

Ultimately, though, flipping will come to an end only when buyers become more serious about the financial commitments they are about to undertake. More thought, research and planning should go to acquiring a home than into buying a hamburger.

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