The Newest Scam to Avoid if you are at Foreclosure Risk: Equity Stripping

By Sheryl Landrum
Mortgage Credit Problems Columnist

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With home foreclosure rates rising, more and more homeowners at risk of foreclosure are vulnerable to being taken advantage of by predatory lenders. Read on to learn more about equity stripping and what you need to beware of.

When a property becomes delinquent with its mortgagor and when it enters foreclosure it is a matter of public record. Foreclosure properties are monitored heavily by predatory lenders. Equity stripping comes in several guises, but is generally a scheme where predatory lenders offer to refinance a home to create a lower mortgage payment, generate cash, and to help the homeowner avoid foreclosure.  However, the mortgage company uses a straw buyer and the title is transferred to him usually under a barrage of loan documentation. With the help of the predatory lender, this straw buyer then refinances the home, pockets the equity, and, in a few months, the home is again in foreclosure and the original owners have now lost all of their equity.

Remember, if you are in danger of a home foreclosure, first call your existing lender to see what options are available; forbearance mortgages are often a good fix for borrowers in danger of a home foreclosure. Lenders do not want to foreclose on mortgages; it costs them money and most of them will work with you to prevent your home from going into foreclosure. Also, if you are approached by a lender who offers you a "quick fix" to your mortgage problems, beware of a foreclosure scheme.

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