Equity Skimming

How equity skimming works

Equity skimming is a form of real estate fraud whereby an unscrupulous investor or person obtains title to someone’s home, and refinances that home to steal the property’s equity. It typically occurs when a homeowner is in financial distress, is unable to make mortgage payments, and is facing foreclosure.

A “fake buyer” or investor contacts you to get you out of financial distress and possible foreclosure troubles and offers to to take over your mortgage payments, or even promises to pay you a large amount of money when the property is sold. The homeowner, however, must agree to sign over the title to the home and either agree to move out of the house immediately or stay on as a tenant in the home and make monthly rent payments.
 
While this unscrupulous “savior” continues to collect your monthly rent payments, they never make any promised payments on your mortgage to the lender, resulting in the lender foreclosing on the home. The end result is that the homeowner loses their home and any rental payments made to the equity thief, as well as seriously damaging their credit rating.

How to spot equity skimming

  • They will not give you any money upfront in exchange for you signing over your home to them, but instead promises money to you “down the road.”
  • You may be asked to sign a power of attorney or sign over the deed of the home.
  • They will say to pay them and they will in turn pay your mortgage company.
  • They will tell you there is no need to get your property appraised.
  • They will not even bother to thoroughly check out the home.

How you can protect yourself

If you are behind on your mortgage payments, contact the Colorado Foreclosure Hotline and talk with a foreclosure counselor at: 1-877-601-HOPE (4673).

Always deal with a reputable person and check them out, including any references. Do not rush into transferring over the title to your home without discussing the legal ramifications with an attorney. Remember, signing over the title to your property is separate from your obligations to make mortgage payments to your lender. 

Never sign a Power of Attorney to someone in these situations without the advice of an attorney. Doing so may result in the thief stealing more from you in addition to your home. As well, contact your lender to see what options are available if you are behind on your mortgage payments; and definitely discuss with your lender the ramifications of you transferring the title to your home while there is still a mortgage in place.

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