Latest in Mortgage Fraud: Flopping

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mortgage 'flopping' fraud scheme

By Les Christie


Why would anyone spread possum urine around a house, turn up the heat and close all the windows for a few days?

Because they're flopping, of course.

Flopping is the latest in mortgage fraud, in which sellers actually want as low a price as possible.

The scheme works if they are underwater on their mortgage, and their lender agrees to a short sale, forgiving the difference between the sale price and the amount owed.

The seller unloads the home for the sandbagged price to an accomplice, who can then clean it up and flip it for a quick gain.

Suspicious short sales, ones flipped the same day, accounted for just under 2 percent of all short-sale transactions in 2011, according to CoreLogic. Floppers averaged a 34 percent gain. The average profit: $55,000.

Fraudsters can get away with it because banks are swamped with short sale requests -- they have more than tripled in the past three years.

The possum urine trick was an extreme example of the methods used to discourage homebuyers, said Ann Fulmer, a mortgage fraud specialist with Interthinx. "It smelled like a hazmat site," she said.

Other tactics: Floppers pull out appliances and take cupboard doors off their hinges. They leave dirty laundry lying around and paint what looks like water damage on the ceilings. They might also invent plumbing or electrical problems, and give appraisers fake repair estimates created by cooperating contractors.

The sellers point out the flaws to legitimate shoppers, and when no one buys, the sellers have a convincing argument to make to the bank, according to Tim Coyle, director of the Financial Services division of LexisNexis Risk Solutions.

They can say: "Look, I've tried to move this property for six months and haven't been able to -- we need to lower the price," said Coyle. "They convince banks that the value of the property has deflated."

It can be hard to refute bogus damage claims without full investigations, according to Rob Hagberg, associate director of fraud investigation for Freddie Mac.

One flopping scam that relied on heavy repair estimates was repeated several times in the Ogden, Utah, area. A group kept claiming houses had been contaminated with residue from crystal meth labs.

"It was the same cast of characters on multiple properties," said Hagberg.

Noticing the pattern, Freddie Mac investigated and broke up the ring.

The agency solicits help from the public to bust floppers and has a toll free number to report suspicious activity: 1-800-4fraud8.

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Latest in Mortgage Fraud: Flopping

1 in every 328 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 859
Change from July 2012: -18.89 percent
Change from August 2011: -34.13 percent

Source: RealtyTrac

Photo: Flickr/Chad Jones

1 in every 321 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 6,737
Change from July 2012: -11.92 percent
Change from August 2011: -22.30 percent

Source: Realty Trac

Photo: Flickr/Nrbelex

1 in every 309 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 5,819
Change from July 2012: +0.41 percent
Change from August 2011: -29.83 percent

Source: RealtyTrac

Photo: Wikimedia Commons

1 in every 308 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 4,390
Change from July 2012: -13.40 percent
Change from August 2011: +25.21 percent

Source: RealtyTrac

Photo: Flickr/J. Stephen Conn

1 in every 299 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 2,002
Change from July 2012: -3.84 percent
Change from August 2011: +29.24 percent

Source: RealtyTrac

Photo: Flickr/hawleyjr

1 in every 297 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 908
Change from July 2012: -27.99 percent
Change from August 2011: +56.55 percent

Source: RealtyTrac

Photo: Wikimedia Commons

1 in every 296 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 1,255
Change from July 2012: +40.22 percent
Change from August 2011: -8.66 percent

Source: RealtyTrac

Photo: Flickr/mrak75

1 in every 285 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 3,312
Change from June 2012: +2.89 percent
Change from July 2011: +47.33 percent

Source: RealtyTrac

Photo: Flickr/hao$

1 in every 282 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 541
Change from July 2012: -34.34 percent
Change from August 2011: -53.64 percent

Source: RealtyTrac

Photo: Flickr/C Oda

1 in every 274 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 3,184
Change from July 2012: -16.82 percent
Change from August 2011: -40.11 percent

Source: RealtyTrac

Photo: Flickr/El Cobrador

1 in every 267 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 9,238
Change from July 2012: +48.83 percent
Change from August 2011: +12.75 percent

Source: RealtyTrac

Photo: Flickr/Vince Alongi

1 in every 249 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 586
Change from July 2012: +14.68 percent
Change from August 2011: +52.60 percent

Source: RealtyTrac

Photo: Wikimedia Commons

1 in every 235 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 16,192
Change from July 2012: +27.67 percent
Change from August 2011: +44.24 percent

Source: RealtyTrac

Photo: Flickr/vxla

1 in every 223 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 429
Change from July 2012: +87.34 percent
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Source: RealtyTrac

Photo: Flickr/Loco Steve

1 in every 204 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 7,354
Change from July 2012: -8.21 percent
Change from August 2011: -27.22 percent

Source: RealtyTrac

Photo: Wikimedia Commons

1 in every 189 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 1,236
Change from July 2012: -19.16 percent
Change from August 2011: -28.39 percent

Source: RealtyTrac

Photo: Flickr/inman news

1 in every 188 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 1,681
Change from July 2012: +178.31 percent
Change from August 2011: -2.38 percent

Source: RealtyTrac

Photo: Flickr/prayitno

1 in every 185 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 1,538
Change from July 2012: +62.24 percent
Change from August 2011: -1.47 percent

Source: RealtyTrac

Photo: Wikimedia Commons

1 in every 153 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 458
Change from July 2012: +49.67 percent
Change from August 2011: +12.53 percent

Source: RealtyTrac

Photo: Wikimedia Commons

1 in every 172 homes received a foreclosure filing in August 2012.

Properties with foreclosure filings: 1,046
Change from July 2012: +13.57 percent
Change from August 2011: -22.92 percent

Source: RealtyTrac

Photo: Flickr/Tom Hilton

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