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Property 'flipping' on the rise
GAO report raps lax HUD oversight of lenders
Thursday, June 29, 2000
THE ASSOCIATED PRESS
WASHINGTON -- The practice of property "flipping" -- continually buying and reselling homes at escalating prices to generate fees for brokers -- is growing rapidly in cities, often leaving buyers with unaffordable payments, Senate investigators have found.
A senator says the Department of Housing and Urban Development is contributing to the problem with lax oversight of lenders in the government-insured mortgage business.
Sen. Susan Collins, R-Maine, head of the Senate Governmental Affairs investigative subcommittee, cites a new report by the General Accounting Office, Congress' auditing arm, that found HUD has not done enough to hold banks and other mortgage lenders accountable for poor performance and violations.
"It appears that HUD has known for several years that its management and oversight of . . . lenders and appraisers has contributed to the increased risk" of improper mortgage practices, Collins said.
But William Apgar, HUD assistant secretary for housing, said instances of flipping involving government-insured mortgages are "isolated."
He rejected the GAO report's criticism of insufficient monitoring by his agency, saying it didn't fairly evaluate HUD's oversight programs. HUD has banned 52 lenders from doing government-insured mortgage business in recent years and has established a program to review home appraisers, Apgar noted.
In a separate study, subcommittee investigators discovered frequent instances of fraud related to flipping, such as inflated property appraisals and falsified documents attesting that homes have been renovated. While flipping is legal in and of itself, fraudulent practices often are used to lure buyers into investing more money in houses than they are worth.
The subcommittee is holding hearings on today and tomorrowto present results of its nine-month investigation and hear testimony from victims of flipping in several cities.
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