Friday, May 20, 2005

Mortgage Lender Adopts Anti-Flipping Policy

Inman News reports that the big banks are closing the door on speculators. "US Bank Home Mortgage this week implemented an 'anti-flipping'policy for conventional home purchases, saying it will no longer fund loans for properties in which the seller has held title for the property for less than 90 days's. Property flipping has become 'a threat to the integrity of the residential real estate industry.'"

Mortgage banker Alex Stenback notes, "It won't eliminate flipping or fraud. If all the top institutional lenders implement similar 90-day seasoning policies, he said, 'You have the subprime market out there waiting in the wings who would be more than happy to finance flipped properties.' People will still be flipping properties, and inexperienced buyers could end up holding high-cost loans on overvalued properties."

For some reason the writer ties the new measures to combating mortgage fraud, but that isn't the meat of the problem; it's speculation.


At 3:34 PM, Anonymous jl said...

I don't get it. It would have been more logical to penalize the seller by charging a prepayment penalty of a couple percents if selling in less than 90 days. Similar to what some mutual fund charge you if you do round trip transactions.

At 3:40 PM, Anonymous nostradamus said...


I don't know if 90 days will make a difference to anyone. But it's a start. Guess it's better than 90 minutes.

At 3:47 PM, Blogger mspenelope said...


90 days will not make a difference.
If it takes 30-60 days to sell a property and then another 30 days to close....the 90 days is just perfect.
The only people they are trying to discourage are the scam artists who are selling to straw buyers. Everyone else is still good to go.
:o )

At 4:16 PM, Anonymous Anonymous said...

Yea, 90days is a joke

The should but fee for flipping ... like 50%

At 4:23 PM, Blogger goleta said...

I've started tracking the foreclosure, preforeclosure, and bankruptcy numbers
since Wednesday May 18 and the most interesting numbers are

1. California has more than 68K preforeclosures.

2. RE related bankruptcies are all on the way up:

Wed 8218
Thu 9326
Fri 11010

Texas ( preforeclosure around 27K):

Wed 6932
Thu 7991
Fri 8724

Oregon (preforeclosure 12.4K)
Wed 1363
Fri 1776

Washington ( preforeclosure around 13K)
Wed 1985
Thu 2253
Fri 2468

At 4:24 PM, Blogger JLP said...

It looks to me like Banks are trying a little CYA measure to stave off lawsuits. Maybe they smell Spitzer on their tails?



PS - HSH has a pretty good article on interest-only mortgages. Just follow this link.

At 4:30 PM, Blogger Thomas said...

Goleta --

Interesting increases. Does your site allow you do look at past numbers? I'd be interested to know if BK filing ordinarily increase towards the end of the week. My experience is that this is the case with a lot of legal filings, as firms spend all week putting the finishing touches on a project.

(So he said while finishing off three projects he'd procrastinated all week doing.)

At 4:47 PM, Blogger goleta said...


You might be right.
I can't find the answer at that site about how they count BKs. Can't find past numbers either. I'll send an email to those guys about the questions you raised.

At 11:49 PM, Anonymous Anonymous said...

A simple requirement of 20% (even 10%) down payment would go a long way.

Also, no matter what loan product one ultimately chooses, he should first be qualified for 30-yr amortization.

Creative financing is a cashflow management tool. It should not be a affordability tool.

At 12:26 AM, Anonymous Anonymous said...

In California, the number of actual foreclosures is very low compared to the number of preforeclosures. I am not sure whether this is related to the unwillingness of banks to pursue foreclosures at this point.

When the bubble burst, I wonder what will the banks do?

They cannot count on much preforeclosure interests without deep discounts.

They cannot all rush to foreclosure as that would further depress collateral value.

They do not want to hold the properties indefinitely.

They can and probably will need bail from the taxpayer.

At 6:54 AM, Blogger deb said...

"In California, the number of actual foreclosures is very low compared to the number of preforeclosures"

Right now, all of these borrowers are able to sell before the actual foreclosure. Once prices flatten or even decline, this will no longer be the case.

At 7:38 AM, Anonymous Anonymous said...

Here in Florida, a condo into which I wanted to buy had pretty skewed prices, for being just a year old. I analyzed the tax records on every unit and found that nearly half of the units had been re-sold almost immediately after purchase. Most were flipped within 30 days and the rest within 60 days. Several of the owners who bought from flippers are trying, not too successfully, to re-flip at the same level of profit.

At 8:25 AM, Blogger John Law said...

when this is over you'll probably have your pick of really nice florida condos.

At 6:11 PM, Anonymous Anonymous said...

John -- I really hope so! It's about the only way I'll be able to afford what I wish for.

At 3:45 AM, Anonymous Anonymous said...

Can someone explain to me if this flipping of foreclosed property is illegal in NJ ? I see several people at auctions buying properties to see a few weeks later that these same properties are going up for sale.

A broker has stated to me that her companies are tightening up on it's practices....and how a lot of criminally minded people are using flipping as a means to launder money. she added that it has been illegal in NJ, but somehow allowed...but not for long.

Any help with allowing me to understand this is appreciated...Thanks !


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