What Are Equity Stripping Frauds?
Equity stripping scam is also known as equity skimming and some call it foreclosure rescue scam when low-income people face foreclosure. This scam normally occurs when the homeowner has entered a complicated transaction with the lender. It is often referred to as a form of predatory lending, began in the early 200s, and performed by investors or small companies that take homes from foreclosed owners in exchange for letting the owner stay in the home as a tenant.
Most often, this kind of transaction take advantage of low-income and uninformed homeowners. Due to the complex transaction and false assurances, victims are often unaware that they are giving their homes and equity. In the past years, some states have taken steps in confronting the more unscrupulous practices of equity stripping. While foreclosure relief schemes could be advantageous and ethically conducted in some cases, most of the time, the practice relies on fraud and difficult terms. A homeowner who is facing foreclosure should take precautions on whom they talk to since there are many unscrupulous people out there who are only after taking away their properties. There are plenty of government run agencies in each state where the homeowner can turn to in a situation like this. The most important thing for a homeowner to do is to talk to the lender.
Most people view equity stripping as a way of lending money to people and taking excessive money as fees and charges. In short, removing the homeowner out of his or her home in the event that the charges or fees are not paid. Just imagine you have spent many years paying your mortgage and building the equity of your home and you suddenly find yourself in a situation where you have to take advantage of what you have built. Although there are many reputable lenders who will be able to give you a home equity loan, there are also many scam artists who will try to rob you of your hard-earned money by stripping all the equity of your home.
In an equity stripping scam, the lender does not have your best interests at all. You will notice a stripping scam if the lender will try to convince you to take out a loan with monthly payments that are too high for you to pay or too high for your income. The loan will be approved since the lender will report your income to be higher than what it really is. After several months, when you fall behind on your home equity loan payments, the lender will foreclose on your home and you will lose it.
Another form of an equity stripping scam is when a lender will promise that you remain in your home regardless if you are facing foreclosure. What you do not realize is that the lender promises you money that will not materialize. They lead you to believe that they will meet your financial needs and let you sign documents that you do not understand. The result is that you will owe more each month than before you face foreclosure. The lender will then foreclose your home and you receive little or none at all for your home equity.
