Hi Friends,
As the market keeps getting worse, Equity Skimming is resurfacing again. Please read and learn so that you can address it if a homeowner brings it up. Please do NOT do this…you WILL go to jail…
There are two variations of equity skimming, both of which not only result in the borrower losing their home, but much of their cash, too.
In both situations, the investor convinces the borrower to sign over the deed to the property with the belief that the investor has a legitimate plan to straighten things out.
One of two things happens next:
• The homeowner stays in the house paying rent to the investor.
• The homeowner moves out and the investor rents the house to another party.
In either scenario, the investor collects rent, but doesn’t pay the mortgage (as originally promised).
The result: The mortgage defaults, the house goes into foreclosure, and the investor skips off with the cash.
When news like this hits the front page of the Internet, every investor in America is under scrutiny.
Read this description of EQUITY SKIMMING from the HUD website. If this doesn’t scare you, nothing will!
www.hudclips.org
U. S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, D. C. 20410-8000
OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER
Mortgagee Letter 85-21
TO: ALL APPROVED MORTGAGEES
SUBJECT: Equity Skimming
I am particularly concerned about the recent recurrence of a scheme to defraud FHA mortgagors and the Government out of their interest in FHA-insured home loans. Our Inspector General has identified a series of instances where unscrupulous investors have set up schemes to prey upon homeowners in financial difficulty through “equity skimming.”
We need your help to alert FHA mortgagors to the dangers these schemes pose. Your effective loan servicing is the indispensable first line of defense to prevent these frauds. Timely contact with homeowners in financial trouble is beneficial to all.
We have prepared the attached notice to alert homeowners to this very real problem. Please send a copy of this notice to all mortgagors who are presently in default and who owe at least two full payments. This is meant to be a one-time mailing to those mortgagors who are now in this stage of default. However, we would encourage each mortgagee to provide the notice or the information therein to mortgagors who may enter a default status in the future.
We plan to include this information in the pamphlet entitled, Avoiding Mortgage Default (HUD-426(PA)), which mortgagees are required to furnish mortgagors in default.
Since equity skimming on FHA-insured mortgages is a Federal crime, I also urge you to report instances of it that come to your attention to the HUD Inspector General.
Your cooperation in this effort is appreciated and will, I am sure, directly benefit all parties.
Sincerely,
Janet Hale
Acting General Deputy Assistant
Secretary for Housing – Federal Housing Commissioner
Attachment__________________________________________________
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, D.C. 20410-8000
OFFICE OF THE ASSISTANT SECRETARY FOR HOUSING-FEDERAL HOUSING COMMISSIONER
A MESSAGE FROM THE FHA COMMISSIONER:
“Beware of False Promises”
Please read this and be aware of possible schemes that could cause you to lose your home, your equity and/or your credit rating.
Recent investigations revealed an “equity skimming” fraud scheme which targets homeowners. Homeowners trying to sell their homes on their own are sometimes in a hurry to sell because they are having financial difficulty. Although the first offer may be perfectly legal and to your satisfaction, be alert to the following examples of how some “buyers” may take advantage of you:
o A “buyer” approaches homeowners and offers to get
them out of trouble by promising to pay their
mortgage payments or promising them a large sum of
cash when the property is sold. This “buyer” often
suggests that the homeowner move out immediately
and that they give them the title to the property
(meaning the buyer would own the property). This
is usually done by using a “quit-claim deed”. A
“buyer” may also offer to let the homeowner stay in
the property or, if they leave, rent it to someone
else.
o The “buyer” collects monthly rent, does not make
any mortgage payments, and allows the lending
institution to foreclose.
o The homeowners believe that they will avoid
possible foreclosure by signing over the property
to the buyer. In addition, they believe that they
no longer have to make any further mortgage
payments to the mortgage company, when in fact,
they still do.
o In the end, the homeowners have lost everything
except any small down payment from the “buyer” and
may have lost a good credit rating. By the time
the lending institution gets around to evicting
the homeowner or tenants, as the case may be, the
“buyer” has made a profit at the original
homeowners’ expense.
Homeowners can avoid being victimized by watching for the following warning signals:
o The prospective buyer does not look closely at the
house; but just takes a quick look around and makes
an offer right away.
o The prospective buyer does not put up any money,
just gives the homeowner a piece of paper, which,
in so many words, is an I.O.U.
o The buyer offers a relatively small sum of money as
a down payment and promises more when the house is
resold.
You can avoid being victimized by taking the following precautions:
o Check any deal involving your home mortgage with a
lawyer and/or your mortgage company.
o Try to get references and credit information from
anyone who offers to bail you out of financial
trouble.
o Check with the state Real Estate Commission or the
local district attorney’s consumer fraud unit to
see if there are previous complaints filed against
the prospective “buyer.”
o Don’t sign any papers unless you understand what
they are. Sometimes homeowners have signed away
the deed to their homes because the “buyer” told
them the papers were something else.
o If you sign an agreement, make sure you get all the
“promises” in writing.
Homeowners with financial difficulties are vulnerable to the so-called “quick fix.” But, if you want to save your home, don’t be fooled by the equity skimmer. Seek guidance and assistance from reputable and concerned parties.
____________________________________________________________________
IF YOU BELIEVE YOU ARE BEING DEFRAUDED, CONTACT YOUR LENDER, OR THE HOUSING AND URBAN DEVELOPMENT OFFICE NEAREST TO YOU.
____________________________________________________________________
*U.S. Government Printing Office: 1985–529-801
Keep a watchful eye out for anyone who does this and turn them in immediately! Our industry can’t afford this kind of negative press.
Keep EVERYTHING above the LAW!!
From the Heart,
Dwan
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