Foreclosure Scams: Equity Stripping

Have you ever heard of Equity Stripping? It can be done in two ways – both very scary, both leaving you, the homeowner, with little to none of the equity you’ve worked so hard to build.

The first technique involves an investor and an unlawful appraiser:

Unscrupulous appraiser creates a report stating that you house is worth more than its current value.
Investor gets you to refinance.
Cash is paid to the investor at closing.
The process is repeated.

Initially, your payments may drop, but your loan balance increases due to high fees and repeated refinancing. The equity you had built up is being paid out in cash during each closing. This scam is primarily for homeowners who have a large amount of equity in their homes.

The second technique works similar to a Leaseback:

You deed your home to an investor.
You sign a rental agreement.
The investor may offer you an option of buying the house back in the future (for a higher price than you sold it to them).
The investor pockets the rent you pay.
THE INVESTOR NEVER MAKES A PAYMENT...

... and you have no idea until you receive another threatening letter from the mortgage company asking for their money. The investor has been cashing your rent checks, and has not made a payment on your mortgage loan.

At this point, I want to mention again that, even though we use the term “vultures” and are painting some very scary scenarios, not all investors, mortgage brokers, realtors, or foreclosure consultants are deceitful. Not everyone who comes to you offering assistance is unscrupulous. It IS important, however, to be informed of the scams that are out there so you can protect your home.

Forewarned is forearmed!