House Flipping

Foreclosures, abandonments and auctions are depressing property values throughout Metro Detroit, and home ownership is becoming less attainable for Wayne County residents. To reverse this trend, the Senate recently passed bipartisan legislation intended to protect consumers from fraudulent or unscrupulous lenders.

We must now shift our attention to another challenging issue that feeds the foreclosure crisis - the practice of real estate flipping, where a property is purchased and resold quickly for exorbitant profits.

Most often, illegal property flipping involves three players: a real estate appraiser, a mortgage originator and a closing agent. A home is purchased for a low value by a buyer who has no intention of paying the mortgage, and a new inflated appraisal is obtained. The house is then sold for the inflated value to an unsuspecting homebuyer, who winds up with a mortgage that is significantly higher than the true value of the home.

As inflated property values get compounded over time, innocent consumers may get stuck with a mortgage payment that does not accurately reflect the true value of their home. This in turn increases their risk of filing for foreclosure.

In many cities like Detroit, register of deeds offices have a severe backlog of documents for recording. This exacerbates real estate flipping. Fraudulent mortgages go unrecorded and, in many cases, unreported.

My legislation, Senate Bill 927, would help solve the problem by revising the register of deeds law to reflect modern filing procedures that can help expedite their work. It would specify how electronic records should be processed and kept, and delete provisions related to paper recording forms and procedures.

As a result, mortgages could be promptly recorded on the day they are filed, which would help the register of deeds identify irregular real estate practices and hopefully stem the tide of illegal home flipping.

Passing this reform would not only fight fraudulent real estate practices, but help keep consumers in their homes.