What if some COMMONLY TAUGHT credit repair advice for real estate investors could LAND YOU IN JAIL? Keep the cuffs OFF and listen up! I’m Carole Ellis. This is Episode 48.
I have heard this credit advice THIS WEEK from a guy I know on Facebook that a number of you probably would (or do) regard as an expert when it comes to real estate financing. And it’s terrible, lousy, horrible advice that can land you in jail (and it just did land a New Jersey banker in seriously hot water and he could get 30 years in prison for it). So you’ll want to pay careful attention…
Before we get to that, however, I want to take a quick minute to mention one of my favorite topics: free money for your real estate deals. Did you know that the federal government – not to mention your state and local bodies – actually provides MILLIONS of dollars in funding for real estate investors who are making, and I quote, contributions to their communities? Think about it: every time you flip a house or purchase a distressed property, you think you’re adding value to the community. Here’s a hint: YES! Check out all the details at www.REI.Today/Grants and see how REAL real estate investors in YOUR area are already taking advantage of these programs – and how you can get started today.
Now, back to keeping you out of jail (even when your trusted experts give you bad advice…) So let’s cut to the chase, here. Real estate investors often have, let’s say, poor credit options, not because you necessarily have bad credit, but because you often have a lot of loans on a lot of properties OR because you need money faster than conventional lenders (who take months to close on a loan!) can get it to you. So investors are always looking for ways to make the system work for them, and one common piece of advice is to apply for a lot of loans at once so that you get approved before the liens on your properties show up for other lenders. While it can land you lots of funding fast, as you are probably aware, it’s not entirely above board. In fact, there’s a name for it, shotgunning, and it can land you in jail.
Here’s what happened to that guy in New Jersey, apparently is known as “Douglas Mo” of “Douglas Mo Mortgage.” He recently pled guilty to spending 2005 through 2014 using his primary and secondary residences to obtain multiple home equity lines of credit. Basically, he sent in a huge number of home equity line applications to various banks in the area all at the same time so that when they evaluated his applications, it appeared that his properties were unencumbered and clear for a great HELOC. However, when those HELOCs were approved, “Mo” ended up with multiple HELOCs on the same property, essentially far overextending his collateral. As the court papers put it, “By engaging in this practice, Mo thwarted the bank’s efforts to learn of security interests held by other banks on his homes.”
Now, as is so often the case with this type of thing, Mo slid by for YEARS. He pulled this off for more than nine years, and nobody appears to have really noticed or cared. That’s why so many “credit repair specialists” actually will tell you TO apply for multiple loans at once as soon as you’ve “repaired” your credit score. But in this case, Mo took things a little bigger, eventually helping other clients do the same thing and also engaging in some allegedly questionable tax document falsification in order to inflate his income so he could get more loans. As you might imagine, things spiraled out of control, and the banks involved lost more than a million dollars and now Mo is waiting for sentencing after entering his plea in a federal court. He could actually spent 30 years in prison, pay a $1 million fine and, on top of that, have to pay restitution for the money the banks lost. So you can see, if that advice goes sour for you, it’s a pretty big deal.
Feeling a little depressed about your funding options now? Don’t be! For starters, as I mentioned a minute ago, you can just get free money from the government in the form of GRANTS to support real estate investors that you never have to pay back anyway. Learn more about that at www.REI.Today/Grants. And if you are curious about other creative financing options, don’t worry! We’ll have something in the REI Today Vault for you soon. Don’t want to miss it? Text REITODAY no spaces no periods to 33444 and I’ll provide you with fast, immediate access to all sorts of great trainings, news coverage, interviews, and lot more timely information that will help make your investing safer, faster, and more profitable.
And remember, when you do that, you’ll also be able to GROW YOUR NETWORK by interacting with me and your fellow listeners to REI Today… so stop by to ask questions, make comments and network with other investors across the country. Text REITODAY no spaces no periods to 33444 or head over to www.REI.TodayVault right now.
REI Nation, thanks for listening in and always remember this:
Your best investment is your own education.
Carole Ellis is the host of Real Estate Investing Today, a popular 9-minute daily podcast focused on educating real estate investors about the important topics that will make their investing SAFER, FASTER, and MORE PROFITABLE. She's also the editor of the Bryan Ellis Investing Letter. She has more than a decade's worth of experience in and reporting on the real estate industry and, additionally, has written dozens of courses on the topic. Carole lives in Kennesaw with her husband, Bryan, and four children. She believes wholeheartedly that your best investment is always your OWN education.