A prevalent scam involves a practice called “flopping,” Barofsky said. In that scheme, investors or home buyers hire brokers to assess a home for less than its market value and convince banks to accept a sale at that level. The buyer conceals from the lender that he has lined up a higher offer and then quickly resells the property for a profit, as in the Connecticut case. Suspected... [more]
A prevalent scam involves a practice called “flopping,” Barofsky said. In that scheme, investors or home buyers hire brokers to assess a home for less than its market value and convince banks to accept a sale at that level. The buyer conceals from the lender that he has lined up a higher offer and then quickly resells the property for a profit, as in the Connecticut case.
Suspected property-valuation fraud almost doubled from the end of 2007 through the first quarter of this year, according to a June 8 report by Interthinx Inc., an Agoura Hills, California- based company that sells mortgage fraud detection software.
In addition to banks losing money, “flopping” may hurt homeowners who complete a short sale and face higher deficiency judgments as lenders seek to recover unpaid mortgage balances, Ann Fulmer, vice president of Interthinx, said in an interview today on Bloomberg Television.
Investors often use real estate broker opinions, which may rely on drive-by inspections instead of full appraisals, to persuade lenders to sell at a low price, Fulmer said in a separate interview. She suggested an Internet search of “How to influence a broker price opinion,” which yielded 74,800 results.
By allowing broker price opinions, the Treasury exposes taxpayers to short-sale fraud after $49 billion of government bailouts for housing, Barofsky wrote to Congress.
“As constituted now, the program permits home valuation, the key vulnerability point for a flopping scheme, without a true appraisal,” he wrote. “No program of this type and scale can be considered well designed without robust protections of taxpayer funds against the predation of criminals, particularly given the inconsistent treatment of home valuation.”
http://www.businessweek.com/news/2010-06-10/banks-face-short-sale-fraud-as-home-flopping-rises-update2-.html[less]
Specifically, Wall Street investors must understand that valuation services have varying degrees of risk. While appraisals prepared by licensed or certified appraisers are widely considered to be the ―gold standard‖ in the industry, lesser services such as automated valuation models and broker price opinions are often used as a cost-cutting method in these situations. Investors deserve greater due diligence.
http://www.youtube.com/watch?v=I5H5RbYZc5o
Specifically, Wall Street investors must understand that valuation services have varying degrees of risk. While appraisals prepared by licensed or certified appraisers are widely considered to be the ―gold standard‖ in the industry, lesser services such as automated valuation models and broker price opinions are often used as a cost-cutting method in these situations. Investors deserve greater due diligence.
http://www.house.gov/apps/list/hearing/financialsvcs_dem/amiron031109.pdf
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