Big Banks Move to Curb “Flipping”

by Alex Stenback on May 19, 2005

Antiflipping_3Part and parcel to much of the real estate speculation boom we just discussed is the practice of property flipping.  Though technically legal, flippers are increasingly using illegal methods (bogus appraisals, loan fraud, etc.) to sell their properties. You don’t have to look very far to see that people are going to jail over this, and the big banks are starting to take action. 

Case in point, the memo [pictured above - click for larger image] we received today announcing US Bank’s new Anti-Flipping policy, which calls property flips "A threat to the integrity of the residential real estate industry," and institutes a 90 day seasoning requirement on new home purchases.

This means that if a seller has owned a property for less than 90 days, they will not approve the loan, the only exceptions being inherited and lender-owned (mostly foreclosed) properties.

Though this is good news, there is a blowback angle:  Most property flippers prey on vulnerable, inexperienced buyers, and as the major banks and agencies like Fannie Mae and Freddie Mac implement anti-flipping measures, there is a booming (and often questionably scrupulous) sub-prime industry circling the lifeboats waiting in the wings who will be more then happy to finance ‘flipped’ properties.  Talk about going from the kiddie pool to the shark tank.

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May 20, 2005 at 12:29 am

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