Denis J. Murphy

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property, flipping, community destabilization


Filed in the United States Court of Appeals for the Fourth Circuit. On appeal from the United States District Court for the District of Maryland.


Amici curiae brief filed by St. Ambrose Housing Aid Center, Associated Communities Organized for Reform Now (ACORN), Southeast East Community Organization (SECO), Park Reist Corridor Coalition (PRCC), and the National Training and Information Center (NTIC) on behalf of Defendant-Appellants, Andrew Cuomo, Secretary of the United States Department of Housing and Urban Development (HUD), and HUD. Amici argue that based upon the statutory construction of 12 U.S.C. §1709(r), the Secretary of HUD had the authority to promulgate 24 C.F.R. §202.3 and to subsequently terminate Appellee Capitol Mortgage Bankers’ ability to originate Federal Housing Act (FHA) loans. Alternatively, amici argue that because “flipping” and the associated egregiously high rates of default associated with this practice were unforeseeable by Congress at the time they enacted §533 of the National Housing Act (NHA), the Secretary of HUD was justified based on his reasonable construction of the statute to use his authority under the NHA to terminate Appellee’s ability to originate FHA loans. “Flipping” property is legal, but can be illegal when a mortgagee makes an artificially high loan on a property as a result of the property having been overvalued, and the mortgagor’s qualifications to buy the property having been most likely misstated. High default rates are characteristic of illegal flipping and leads to community destabilization, “homeowner flight”, and under investment by legitimate banks and businesses.


Property Law and Real Estate