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'Flopping' - a new type of scam in the housing market

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  • 'Flopping' - a new type of scam in the housing market

    May. 10, 2011

    Although reports of mortgage fraud nationally fell 41 percent in 2010 from 2009, the continuing downturn in the housing market has fostered new ways of perpetrating it, experts say.

    Consider "flopping" - the intentional misrepresentation of housing value for purposes of illegal flipping.

    Here's how it works: A real estate agent or broker identifies properties with severely depressed values. These could be properties with mortgages that exceed the present values or they could be short sales or foreclosures.

    A property is valued using a "broker price opinion." The broker's "opinion" is a low-ball price, because his intention is to profit from a quick resale for a higher price.

    A lender, believing the broker's assessment is legitimate and unaware of any scheming, agrees to the lower sales price.

    The broker buys it at the greatly reduced price, arranges for a "straw buyer" to purchase it, then flips it for a higher price than negotiated with the lender. The broker pockets the profits.

    The broker pays off any of the participants that enabled the scheme, and then moves to the next target property.

    "This is a misrepresentation of value," said Denise James, coauthor of an annual report on the topic by the LexisNexis Mortgage Asset Research Institute during a teleconference Monday.

    She said such schemes could add to problems faced by regions with an abundance of distressed housing, since "lenders will grow concerned with false depreciation of values," thus making the buying and selling of homes even more difficult in depressed housing markets.

    "Flopping increases as desperation to get rid of rising inventory grows," she said.

    While reports of fraud by 600 lenders and other real estate businesses to the LexisNexis mortgage institute declined year over year, "the decrease does not necessarily correlate to actual occurrences of [fraud], which are rising according to several industry sources," James said.

    Suspected mortgage fraud submitted to the Federal Financial Crime Reporting Network rose 5 percent from 2009 to 2010, for example.

    The list of crimes included short sales, bankruptcy abuse, debt-elimination scams, income and employment misrepresentation, Social Security number theft, and loan-modification fraud.

    Mortgage fraud has become more complex and is more difficult to verify, James said, because many lenders are trying to implement new procedures at the same time they are trying to recover huge financial losses.

    Florida leads the list of states with high levels of fraud, with the institute's index showing more than three times as many reports of verifiable fraud than legitimate mortgage originations.

    New Jersey is fourth on the list, with about twice as many reports than originations. Pennsylvania was not listed because its number of fraud cases did not reach the institute's threshold for measurement.

    One of the fastest-growing ways homeowners are being bilked is by people posing as the new servicers of their mortgages, she said.

    "They [the homeowners] get letters saying, 'I'm your new servicer, send your payments to me,' " James said. "Homeowners who are not aware that there is a formal procedure involved in changing servicers" fall victim to this scam.


    http://www.philly.com/philly/business/121548524.html
    8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

  • #2
    LOL, not sure I see the fraud.

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    • #3
      Originally posted by HHM View Post
      LOL, not sure I see the fraud.
      shoot!! really?? since i believe YOU!! i know it's really happening here in florida...BIG time!
      8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

      Comment


      • #4
        If you sell your property for below market value because of what someone else told you, that is your problem, even if you are a bank.

        Unless the bank hired the broker this is just stupidity on the part of the bank.

        If you come knock on my door and tell me that you have an opinion that my house is worth 50,000 and I sell it to you for that amount, that is just my stupidity.

        Comment


        • #5
          Originally posted by chrisdfw View Post
          If you sell your property for below market value because of what someone else told you, that is your problem, even if you are a bank.

          Unless the bank hired the broker this is just stupidity on the part of the bank.

          If you come knock on my door and tell me that you have an opinion that my house is worth 50,000 and I sell it to you for that amount, that is just my stupidity.
          true, but i think many people just want OUT so badly that these snake mouth people sell them a bill of bull and they fall into it. sad, but true.
          8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

          Comment


          • #6
            Okay, my sense is the article was saying that the banks were the victims...I am not all that sympathetic.

            I don't think the homeowners are all that victimized because they are upside down in the house anyway and need to get out.

            Comment


            • #7
              Originally posted by HHM View Post
              Okay, my sense is the article was saying that the banks were the victims...I am not all that sympathetic.

              I don't think the homeowners are all that victimized because they are upside down in the house anyway and need to get out.
              i think it's both, really the bank and also that poor person, (the new owner) sending their mortgage payment to a fraudulent mortgage serving company. maybe not so much the person "selling" the house, however, it's a lose lose for all...except those pocketing the money!
              8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

              Comment


              • #8
                Seems to me the question is, how do you determine "value" in a depressed market? Isn't it what someone will actually pay?

                Keep On Smilin'

                Comment


                • #9
                  Originally posted by keepsmiling View Post
                  Seems to me the question is, how do you determine "value" in a depressed market? Isn't it what someone will actually pay?
                  it's like the basic laws of economics...supply and demand...so much supply and no demand = nothing zero value...remember beanie babies...LOL!!
                  8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

                  Comment


                  • #10
                    Tobee, how well I remember. My intro to ebay was thru a friend selling them in a get rich quick scheme lol... and we all know what they are worth today. Which is precisely my point.

                    Keep On Smilin'

                    Comment


                    • #11
                      One shocking case of flopping involves pro debtor attorney Carol Asbury down here in Florida. Indicted with her are an ex-NFL player etc. http://4closurefraud.org/2011/04/28/...ecret-service/

                      Comment


                      • #12
                        Originally posted by keepsmiling View Post
                        Tobee, how well I remember. My intro to ebay was thru a friend selling them in a get rich quick scheme lol... and we all know what they are worth today. Which is precisely my point.
                        me too!!!!!!! like the dinosaur going for 3k!!! the truth!
                        8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

                        Comment


                        • #13
                          Originally posted by ByeByeCCs View Post
                          One shocking case of flopping involves pro debtor attorney Carol Asbury down here in Florida. Indicted with her are an ex-NFL player etc. http://4closurefraud.org/2011/04/28/...ecret-service/
                          i saw that!! and worth the read!
                          8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

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