Watch Out For "Equity Stripping" Scams

The New York Times has an article about a growing problem, a scam called “equity stripping.” Here’s how it works: You answer an advertisement targeting people who are facing foreclosure, but want to stay in their homes. You think you’re refinancing your loan at a lower rate, but in reality you’re transferring the deed to someone else. That person then takes out as much as they can against the value of your home. From the NYT:

Jessica Attie, co-director of the foreclosure prevention project at South Brooklyn Legal Services and the lawyer for the Johnsons, said her office was overwhelmed with homeowners who had handed over their deeds to people pretending to help “save” their homes.

We know times are tough and a lot of homeowners are facing difficult financial decisions, but make sure you know what you’re signing. If someone offers to “temporarily” buy your home, warning bells should go off.

New Scheme Preys on Desperate Homeowners [NYT]
(Photo:Oscar Hidalgo, NYT)

Comments

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  1. Godz says:

    I wish I thought of this.

  2. ThufirHawat says:

    Quoth the article: “But the Johnsons unknowingly transferred their deed to a straw buyer working with Home Savers, court documents contend.”

    Purely as a practical matter, it is pretty hard to transfer the deed to a property without knowing it. Hints include documents called “Agreement to Sell” (where you are the seller) and “Warranty Deed” (where you are the grantor).

    The two “victims” state that they should have or did know better, but that (i) “[T]hey wanted to remain in the house” and (ii) “‘I had no idea what I was doing,’” but that “he was easily tempted.” Neither are the statement of someone easily misled; they are instead the statements of someone who *knew* they were entering a deal too good to be true. Remember that these individuals were 30 days from the street already, and were already two or more payments in arrears, as the foreclosure notices were already posted.

    The asked for legislation is equivalent to asking the government to “stop me before I kill again.” It is not warranted; perhaps some personal responsibility is.

  3. blaitarch says:

    There are predatory statutes in law. Writing all these people off as idiots instead of desperate is unwarranted.

  4. Papercutninja says:

    Isn’t this similar to those daytime TV commercials that advertise “reverse mortgages” to senior citizens? Don’t the old folks realize that “reverse” means opposite? So instead of paying a mortgage to own a home, the shysters pay you slowly and own YOUR home?

  5. LatherRinseRepeat says:

    It’s funny.. When I drive around, I see a lot of cars with stickers on the rear window or somewhere on the door, advertising refinancing or foreclosure assistance or first time buyer home loans with no money down.

    When every Tom, Dick, and Mary is offering refinancing or home loans out of the back of their car, you know the real estate and banking industry is in serious trouble.

  6. Islingtonian says:

    but these scammers are taking advantage of people who don’t know what they are getting into, either because they aren’t fully explained what they are signing or because they are not able to understand the conditions? i don’t see how the victim should be blamed in this case. blame the guys “preying” (language the article uses) on vulnerable people.

  7. CumaeanSibyl says:

    @Papercutninja: Yeah, but the point of a reverse mortgage is you don’t have to pay them back, your kids do after you die. Great deal… for you.

  8. LTS! says:

    At what point do you stop protecting stupid people from themselves? If you don’t understand what you are getting yourself into, or if it deals with something that has great importance in your life perhaps you are better off consulting someone with a brain.

    Screw victims, laws to protect morons from themselves are pointless because then you need people to enforce those laws, and prosecute those who break them, and then a place to house them, and all of that means that my taxes have to go up because some idiot didn’t know how to properly finance their home and balance their budget.

    Perhaps the US Government can fund a new department. We’ll call it the Department of Internal Protection against Scheisters, Hacks, Idiots, and Twits. I’m sure the DIPSHIT department will be popular.

    The bottom line, if you really want to stay in your house but you haven’t made payments because you can’t afford them.. then you should get the hell out of the house.