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Equity Skimming is a no-no and it can lead to jail time

First off, I want to wish all the Dads out there a Happy Father’s Day.
Enjoy
your time with your family.  Family is what makes investing worth
the
effort.

Now on to keeping you out of jail.  Staying out of jail is
a key component
to enjoying life with your family, so it just soft of
dovetails with todays
topic.  The article below talks about one of the sleezy
illegal things that
I have seen real estate investors go to jail over.  Don’t
do this.

A Note on Equity Skimming
By David M. Tkacik,
Esq.
The term “equity skimming” has various definitions but
invariably
involves an investor purchasing a home from a homeowner in
foreclosure
subject to the existing mortgage with the false promise of
rescuing the
homeowner from foreclosure.  The investor then collects rent
from an
unsuspecting tenant while the foreclosure process works its way
through the
court system, but the investor never intends to bring the
mortgage current.
This activity is not only unethical to the homeowner in
default, the
lender, and tenant, but it is also illegal and can carry a fine
of up to
$250,000 or the possibility of imprisonment of up to five years, or
both.
The federal law dealing with equity skimming, 12 U.S. Code Section
1709-2,
states as follows:
Whoever, with intent to defraud, willfully
engages in a pattern or practice
of—

(1)    purchasing one- to
four-family dwellings (including condominiums and
cooperatives) which are
subject to a loan in default at time of purchase or
in default within one
year subsequent to the purchase and the loan is
secured by a mortgage or deed
of trust insured or held by the Secretary of
Housing and Urban Development or
guaranteed by the Department of Veterans
Affairs, or the loan is made by the
Department of Veterans Affairs,

(2)    failing to make payments under the
mortgage or deed of trust as the
payments become due, regardless of whether
the purchaser is obligated on
the loan, and

(3)    applying or
authorizing the application of rents from such dwellings
for his own
use,

shall be fined not more than $250,000 or imprisoned not more than 5
years,
or both. This section shall apply to a purchaser of such a dwelling,
or a
beneficial owner under any business organization or trust purchasing
such
dwelling, or to an officer, director, or agent of any such
purchaser.
Nothing in this section shall apply to the purchaser of only one
such
dwelling.

At the state level, the Pennsylvania Attorney General
may also have causes
of action against the investor under existing consumer
protection statutes.
Investors marketing to homeowners in foreclosure should
pay particular
attention to these laws and avoid equity skimming schemes at
all costs.
David M. Tkacik, Esq. is a senior associate at Dornish Law
Offices, P.C., a
landlord and real estate investor.  He can be reached at
412-765-2726 or
DTkacik@Dornish.net.

Permanent link to this article: http://pittsburghreia.com/equity-skimming-is-a-no-no-and-it-can-lead-to-jail-time/