So, do we have a deluge of fraud and flipping?

Not hardly.

In the past year some 6 million new and existing homes were sold, and millions of properties were refinanced. Mortgage fraud, whether by flipping or otherwise, is a statistical rarity. We have more-than-adequate laws in place to deal with such problems. Illegal flipping leaves reams of evidence, the penalties are severe, and the protective systems evolved by the lending industry work enormously well -- and therein lies a potent problem.

In the past few years there has been a studied effort to produce "paperless" loan applications and instant loan approvals. Such goals surely seem attractive, but in practice they may be either unattainable or attainable only with increased lender risk.

Based on a credit check and complete sale agreement a lender can provide an instant loan approval subject to a few verifications. For instance:

The "problem" with such checks is that they take time and require both paperwork and legwork. Alternatively, the current loan application process keeps both lenders and buyers from being easily swindled, and prevents the very forms of mortgage fraud which are now getting so much attention.

Follow Up

Last week I wrote that HUD was terribly out-of-line in trying to sue gun manufacturers, a conclusion now echoed by an editorial in The Washington Post (See: The HUD Gun Suit, Dec. 17, 1999)

"HUD," says the Post, "is organizing plaintiffs -- the federally funded authorities that run public housing around the country -- for a national class action in which the government itself has no direct role. HUD is doing so with the aim not of winning the suit but of pressuring the industry into pre-litigation settlement. What business does the federal government have, if it is not willing to file a suit on behalf of the United States, ginning up surrogate plaintiffs with a clearer cause of action?"

Not to be outdone, Daniel Mitchell, writing in The Washington Times, says that "The stated reason for the proposed lawsuit is that HUD spends $1 billion yearly on crime control in nearly 3,200 public housing projects and that gun violence contributes to this expense. The administration claims they are not after money, incidentally, but instead are seeking to stop "irresponsible marketing practices" on the part of gun makers. HUD also hopes that the menace of federal litigation will convince manufacturers to throw in the towel and settle the dozens of lawsuits filed by local governments." (See: Trampling the rule of law, December 17, 1999)

"As a practical matter," says Mitchell, "HUD's arguments are absurd."

And, as a nice reminder, Mitchell notes that "HUD is the nation's biggest slumlord, and it is HUD that should bear at least some of the responsibility for the dangerous conditions in public housing projects."

The Common-Sense Mortgage

The latest edition of The Common-Sense Mortgage -- in its second printing since September -- is now available in bookstores online and off. In print for nearly 15 years and widely recognized as the standard consumer guide to real estate financing, it's described by syndicated columnist Robert Bruss as "an encyclopedic, detailed summary of just about everything real-estate investors, agents, lenders and borrowers want and need to know about mortgages."

"On my scale of one to 10," says Bruss, "this superb book rates a 10."

"This continues to be the most, lucid, comprehensive treatment of the subject on the market," says The Real Estate Professional. "If you want solid, reliable information about residential real estate financing, written in a thoughtful, convincing style, this is your source."

For additional information, press here.

Question Of The Week

Q: Our lender has provided us with some paperwork explaining how to cancel PMI. We think the lender is wrong. Can our broker tell us whether the lender is acting legally?

A: Brokers assist others in the purchase and sale of real property and certain other tasks, depending on the state where they are licensed. However, it is not within the province of brokerage to evaluate the legality of lender actions or writings. This is a question to be discussed with a knowledgeable real estate attorney.

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