Returning Equity To SS Seller

We all know that generally mortgage companies agreeing to a discounted payoff do not want to see the seller getting any money out of the deal (the obvious exception being FHA, where the seller can get around $1000).

And we all have read that one way around this is to "purchase" certain non-real-estate items from the seller in a separate transaction with a separate bill of sale (drapes, appliances, security systems, whatever) for an amount of cash that is acceptable to the seller and reasonable for the goods being sold.

My questions:
1) Are there any specific legal measures that should be taken to protect / further legitimize this secondary transaction?

2) Has anyone ever had this backfire (mortgage company found out and came after you)?

3) Are there any circumstances where folks recommend not using this approach? The only one that I have heard of was where a buyer was required to sign a written affidavit that they had "never had any other business dealings" with the seller -- in which case the buyer went back to the seller and explained that they would get nothing.

4) Any other thoughts folks would have on the topic?

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