An equity stripping scam is otherwise known as equity skimming and sometimes as foreclosure rescue scam when low-income people face foreclosure. This scam usually happens when a homeowner has entered a complex transaction with a lender. It is commonly referred as a kind of predatory lending which started in the early 200s, and performed by small companies or investors taking homes from foreclosed owners in exchange for allowing the owner to stay in it as a tenant.
Usually, this type of transaction takes advantage of low-income and uninformed homeowners. Because of the complexity of the transaction and false assurances, victims often are unaware that they are giving away their homes and equity. In recent years, several states have taken steps to confront this unscrupulous practice of equity skimming. Although foreclosure relief schemes could be beneficial and ethically conducted in some instances, most of the time, the practice relies on fraud and hard terms. A homeowner facing foreclosure should take extra care in whom they are talking to because there are many unscrupulous people out there who is after taking away their home. There are many government run agencies in every state where the homeowner can turn to in this kind of situation. The most important thing for a homeowner to do is to talk to the mortgage lender.
Many people view equity stripping as lending money to people and taking excessive money as charges. In short, removing the homeowner out of the home in the event that the fees and charges are unpaid. Imagine you spent many years paying down your mortgage and building home equity and you suddenly find yourself in a situation where you must take advantage of what you have built. While there are plenty of reputable lenders who will be able to give you a home equity loan, there are also many scam artists who will rob you of your hard-earned money by stripping all your home equity.
In an equity stripping scam, the lender does not have your best interests at heart. You will have an idea of a stripping scam if the lender tries to convince you to take out a loan with monthly payments that are too high for your income. The loan will be approved because the lender will report your income to be higher than what it actually is. After several months, when you fall behind on your loan payments, the lender forecloses on your home and you will lose it.
Another kind of an equity stripping scam is when the lender promises that you stay in your home regardless if you are facing foreclosure. What you do not know is that the lender promises you money that will not come up. They will lead you to believe that they will meet your financial needs and have you sign documents that you do not understand. The result is that you will owe more every month than before a foreclosure. The lender then forecloses on your home and you will get little or no equity at all.
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