Are you vulnerable?
Equity strippers are equal opportunity scammers, but especially vulnerable are home owners with low incomes but a good amount of equity, because they have a hard time borrowing. If you’re in this situation, you may want to refinance to get cash out, for example, but legitimate banks won’t help you.
Hiding from equity strippers isn’t an option — you’re easy to find. For example, to start their mortgage scam, predators may blanket addresses in a neighborhood with a direct mail campaign promising fast cash and easy rates.
How you get hit by equity stripping
Of course, you don’t have to rise to the bait, but if you do, this is what typically happens:
Scammers posing as lenders offer you more loan than you can afford or encourage you to pad your income on a loan application. By pushing a home loan with too-high monthly payments, they’re counting on foreclosing on your property when you fall behind.
They get your home, which they can turn around and sell at a profit. You, meanwhile, are homeless — the victim of a mortgage scam.
In another version, equity-stripping scammers convince you to sign over the deed in order to “secure better terms” or avoid a feared foreclosure. Then:
- They bury the details under a mountain of paperwork, often charging exorbitant transaction and closing fees.
- Upon transfer of property title, they promise to pay off the mortgage lender and rent back to you property you no longer own.
- You may find yourself paying more rent than your mortgage payment. When you fall behind, you’re evicted.
- They may then “inherit” the house you can no longer afford by paying off the mortgage, at a better rate than they were giving you.
Defend yourself with a level head
The best way to protect yourself from a mortgage scam:
- Never do business with anyone who calls you, mails or emails you, or knocks on your door with offers to help you with your mortgage. Work with nationally known banks or trusted local institutions.
- Never enter into any rescue agreement without first consulting your own lawyer — not a lawyer provided by the person offering to “help” you.
- Never turn over your deed to anyone without first consulting a trusted adviser.
- Don’t agree to a home equity loan if you can’t afford it. A good rule of thumb: Your combined home loan payments shouldn’t exceed 28% of your gross income.