Equity Skimming On The Rise In Massachusetts

The Boston Herald is reporting on:

• "a growing problem in the Bay State’s foreclosure crisis: tenants who pay rent regularly, but still lose apartments when banks foreclose on landlords’ buildings."

This problem generally arises when a real estate investor who gets in over his head and can't afford the mortgage payments on an investment property decides to stop making his mortgage payments, and at the same time, gets a tenant to unwittingly remit monthly rent payments without knowledge of the loan default. The owner/landlord, resigned to allowing the bank to foreclose on the investment property, will continue to "skim the rent" from the home until the place is finally auctioned off and he/she loses the title to the home.

The problem can also occur when an investor or homeowner, after getting in over their heads on their mortgage payments, unwittingly signs over title to the home to a "professional equity skimmer" (possibly someone offering purported foreclosure rescue services ) who promises to continue to make the loan payments, and instead proceeds to find a tenant for the home, pocket the rent, and stiff the bank.

For the Boston Herald story, see Why Us?: Tenants say they’re foreclosure victims (if link expires, try here).

For other posts on tenants stuck holding the bag in foreclosure evictions, go here and go here, and go here.

Statutes specifically addressing the practice of equity skimming (aka rent skimming) exist in some states, as well as in Federal law (12 USC 1709-2). alpha