the process of inducing a borrower to repeatedly refinance an existing mortgage, each time charging fees for both the new loan and a prepayment penalty on the old loan. Typically the fees are financed into the loan. Over time, the borrower becomes hopelessly indebted and often ends in default and foreclosure. The technique is a type of predatory lending.
Example: Clyde Clueless was informed by his lender that interest rates had fallen and he should refinance his loan. The lender charged 5 discount points for the new loan plus a high application fee. As a result, Clyde's monthly payment was higher and he owed more principal, even though the interest rate was a bit lower. The lender was flipping the loan in an attempt to commit Clyde to a loan he could never repay.
