Equity Skimming is a Mortgage Fraud committed by skimming the equity from a property as part of subprime lending refinancing. This fraud occurs when a homeowner who is in default on their real estate taxes or mortgage is offered a loan to prevent immediate foreclosure.
The Florida Legislature has provided that equity skimming is a third degree felony. A person convicted of a third degree felony may be subject to imprisonment of up to five (5) years and a $5,000 fine.
Equity stripping – the process of reducing the equity value of a real estate asset – is one of the oldest asset-protection strategies. Essentially, it entails encumbering a property with debt to such an extent that there is little or no equity for creditors to acquire.
Two warning signs of equity skimming are as follows: The prospective buyer agrees to buy the home right away and without giving the property a thorough look; and. The prospective buyer does not put any money down but rather, hands you a piece of paper that, in so many words, says, “I.O.U.”
Phantom Sale: A fraudster identifies a property, which. is typically abandoned, and then files a false deed that transfers the property to the fraudster or a co-conspirator. The scammer then applies for a mortgage loan, or conveys the property to a co-conspirator, and then pockets the loan proceeds or sale proceeds.
In many cases, straw buying is an illegal activity. With respect to mortgage fraud, straw buyers are loan applicants used by the unscrupulous to obtain mortgages, with the deliberate intent to disguise the true buyer's identity or the true nature of the transaction.
Shotgunning: Occurs when multiple loans for the same home are obtained simultaneously for a total amount that may be in excess of the actual value of the property.
Examples of Equity Skimming
Equity involves a home owner who has defaulted on their mortgage and whose property may be facing foreclosure. Another party, who is usually an investor, comes in and proposes to help the homeowner out by buying the home before it gets foreclosed.
A silent second mortgage is a second mortgage placed on an asset (such as a home) for down payment funds that are not disclosed to the original lender on the first mortgage. The second mortgage is called "silent" because the borrower does not disclose its existence to the original mortgage lender.
For example, if a lender refuses to make a mortgage loan because of your race or ethnicity, or if a lender charges excessive fees to refinance your current mortgage loan based on your race or ethnicity, the lender is in violation of the federal Fair Housing Act.
Examples of Lending Discrimination
Providing a different customer service experience to mortgage applicants depending on their race, color, religion, sex (including gender identity and sexual orientation), familial status, national origin or disability.
A non-arm's length transaction occurs when the buyer and seller have a personal relationship. A deal between friends, family or co-workers is considered to be a non-arm's length transaction. With these home sales, self-interest may not be the motivation, for instance, when parents sell their home to an adult child.
A straw buyer is a person who makes a purchase on behalf of another person. The act is only considered illegal if the transaction is fraudulent or the goods are purchased for someone who is legally barred from making the purchase themselves.
Loan flipping occurs when a lender encourages a borrower to refinance a loan, which generates fees for the lender, but doesn't actually help the borrower.
Someone who lacks a credit history with one of the nationwide credit reporting companies is considered "credit invisible" or a credit ghost.
Blind loan modification is a relatively new term that has popped up in the area of bank lending. Blind loan modification is a way that banks make an alternate offer to you on your preexisting mortgage with them. These offers may include a different interest rate, different monthly payment, and different terms.
An air loan is a type of mortgage fraud that seeks to profit from unsuspecting lenders. A mortgage broker invents both a property and a borrower in order to earn false profits on completed loan transactions.
The maximum fine that the FL-OFR can levy against a licensee for a violation is $25,000.
An inflated loan appraisal determines an asking price that is much higher than the market value of the home. An over-inflated appraisal is a type of mortgage fraud that could cause a buyer to pay much more for a home than they should.
Before a mortgage is filed on the property, it must be signed by a representative from the lender and the borrowers. There is also a place for someone to sign as a witness to the transaction. Anyone whose name is on the deed must sign the mortgage. Your spouse must sign even if they are not on the mortgage.
Red Flag #1: When they offer you a rate that's lower than the APR. When a mortgage's APR is much higher than the actual rate, it means that the fees are a lot higher, too - and you'll be paying them over the life of your loan. A low rate might be enticing, but you have to consider the long-term cost.
The appraisal may include red flags symptomatic of inflated value. Many of the same red flags that accompany a traditional flip also apply to cash-out purchase fraud – straw buyer, false source of funds and false occupancy.
The process whereby a lender solicits an existing borrower to refinance their current mortgage with little to no financial benefit to the borrower with a different or the same investor. Churning involves repeatedly refinancing a loan with additional closing costs and fees on top of the original principal amount.
Simply put, predatory lending becomes a crime in California when the lender manages the loan transaction to extract the maximum value for itself without regard for the borrower's ability to repay the loan.