What is Equity Skimming?
Imagine this: you’re facing financial hardship, your mortgage payments are piling up, and foreclosure looms large. Suddenly, a knight in shining armor appears, promising to save your home. They offer to buy your property, rent it out, and use the rent to pay off your mortgage. Sounds too good to be true? It probably is. This, my friends, is the essence of equity skimming, a real estate fraud that preys on vulnerable homeowners.
The Anatomy of an Equity Skimming Scheme
Here’s how equity skimming typically unfolds:
- The Bait: The perpetrator targets homeowners in financial distress, often those facing foreclosure.
- The Hook: They offer to buy the property, promising to save the homeowner’s home.
- The Switch: Instead of paying off the mortgage, the perpetrator pockets the rent, leaving the homeowner with mounting debt and a property on the brink of foreclosure.
- The Disappearance: The perpetrator vanishes, leaving the homeowner with a financial and legal nightmare.
Examples of Equity Skimming
Equity skimming can take various forms, including:
- Rent-to-own scams: The perpetrator promises to sell the property to the homeowner after a period of renting, but never intends to do so.
- Lease-purchase scams: The perpetrator leases the property to the homeowner with an option to buy, but the purchase price is inflated, making it impossible for the homeowner to afford.
- Fake refinancing: The perpetrator convinces the homeowner to refinance their mortgage, but pockets the proceeds instead of using them to pay off the original loan.
The Consequences of Equity Skimming
Equity skimming can have devastating consequences for homeowners, including:
- Loss of home: The homeowner may end up losing their home to foreclosure.
- Damaged credit score: The homeowner’s credit score can be severely damaged, making it difficult to obtain future loans or rent an apartment.
- Legal problems: The homeowner may face legal problems if they are unable to make mortgage payments or are evicted from the property.
Protecting Yourself from Equity Skimming
If you’re facing financial hardship and are considering selling your home, be wary of offers that seem too good to be true. Here are some tips to protect yourself from equity skimming:
- Do your research: Before entering into any agreement, research the potential buyer and make sure they are legitimate.
- Get legal advice: Consult with an attorney who specializes in real estate law before signing any documents.
- Don’t rush into anything: Take your time to understand the terms of the agreement and don’t feel pressured to make a decision immediately.
Equity Skimming: A Crime with Serious Consequences
Equity skimming is a serious crime that can have devastating consequences for homeowners. If you suspect you are a victim of equity skimming, it’s crucial to contact the authorities immediately. You should also seek legal advice from an attorney who can help you navigate the legal process and protect your rights.
Remember, knowledge is power. By understanding equity skimming and its consequences, you can protect yourself from becoming a victim of this fraudulent scheme.
Penalties of Equity Skimming
Equity Skimming is a type of Mortgage Fraud. The FBI’s Financial Crimes Unit investigates these matters for filing of charges on Equity Skimming violations. If you are charged federally with these offenses, you might be subject to jail time, fines, and other penalties for equity skimming.
Equity Skimming and related penalties of sentencing are detailed in 12 United States Code USC Section 1715Z-19. These penalties include:
- Five years in prison
- Up to $500,000 in fines
Charges of conspiracy, specifically conspiracy to commit bank fraud and making false statements to influence a financial institution, may also arise from equity skimming. Penalties of these Federal charges may include:
- 30 years in prison
- Up to $1 million in fines
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A mortgage fraud known as “equity skimming” is when a property’s equity is taken advantage of during a subprime loan refinancing. When a homeowner who is behind on their mortgage or real estate taxes is offered a loan to stave off immediate foreclosure, fraud occurs.
When a loan is provided in exchange for the title and property of a home being transferred, fraud is created. Rather than being used to pay mortgage payments, rental income that is already due is taken from the property and given to the lender for personal use. This allows the mortgage company’s foreclosure to proceed on that property.
Equity Skimming often involves:
- Corporate shell companies
- Corporate identity theft
- False reports of income
- False credit reports
- Straw buyers
Don’t do this! Equity skimming is a crime. #realestateinvesting #subjectto #subto #creativefinance
FAQ
What is the federal statute for equity skimming?
What is considered equity skimming in Florida?
Is equity skimming the same as equity stripping?
What describes equity stripping?
What is equity skimming?
Equity skimming is a type of mortgage fraud in which the perpetrator obtains a mortgage loan in the name of the property owner, but does not intend to make payments on the loan. Instead, the perpetrator rents out the property, collects the rent and uses it for personal gain, and eventually allows the property to go into foreclosure.
Is equity skimming illegal?
It’s important to note that equity skimming is illegal, and homeowners who suspect they are being scammed should contact the authorities immediately. They should also seek legal advice from an attorney who is experienced in real estate law. An equity skimming scheme can severely affect the ability to convey title to a property.
Are equity skimming and equity stripping the same thing?
No, equity skimming and equity stripping are not the same things. Equity skimming is a type of mortgage fraud in which the perpetrator obtains a mortgage loan in the name of the property owner, but does not intend to make payments on the loan.
Is equity skimming a scam?
Additionally, equity skimming can also affect the legitimate mortgage holder and can lead to foreclosures and loss of the property. It’s important to note that equity skimming is illegal, and homeowners who suspect they are being scammed should contact the authorities immediately.