The essence of Collateral Risk Measure (CRM) is that it helps everyone understand the potential downside of real estate investment. Lenders use this type of tool on nearly every loan in their portfolio because they want to understand their exposure if the loan goes bad. That is, they want to know how much money they will lose if the property goes into foreclosure. So, they review area foreclosure activity, property flipping events, appreciation/depreciation trends, property history and other factors that can influence the value of a property and that gives them insight as to their risk potential.

The term property flipping often has a very negative connotation connected to it because of the opportunistic image some property flippers have acquired over the years. It is true that much of the real estate and mortgage fraud that occurs is the result of fraud rings that use multiple people (straw buyers, appraisers, real estate agents etc.) to falsely inflate home prices, sell (flip) the property to a "friend", cash-out refi's are taken at a very high loan-to-value (LTV) ratio and eventually, the buyer walks away with the proceeds and the property goes into foreclosure.