Equity stripping is a foreclosure rescue scheme. It is a form of predatory lending and also called equity skimming. In this scheme, a troubled homeowner facing foreclosure is considered the prey of the scammer. The scammer promises to buy the home and agrees to lease the home back to the homeowner. Normally the homeowner is told they can remain in the home as a tenant.

What the homeowner is unaware of is that they are giving away their property as well as their equity. These scam artists take advantage of uninformed low income consumers. There are some foreclosure re-conveyance that can be beneficial and ethic. Most of the time, there is fraud and unrealistic terms.

A homeowner may find themselves in situations where they need to take advantage of their home equity. There are lenders who are reputable who will give you a home equity loan. This will allow you to use that cash.

Unfortunately, there are scam artists who will try to also take advantage of homeowners and strip the equity from the home. An un-reputable lender will convince a homeowner to take out a loan with higher monthly payments that the income will allow. The loan may be approved because the lender reports higher income than the homeowner makes. After a few months, the equity loan payments fall behind and the lender forecloses on the home.

There is also the scenario of the lender who promises to leave you in the home although you may be facing foreclosure. What homeowners don’t know is that the lender will not lend the money. The lender asks you to sign papers that you don’t understand. These papers usually give homeowners a higher payment per month than before the foreclosure. That lender then forecloses on your property. The equity left is very little or none.

Another scam consists on hidden terms. Perhaps a homeowner is behind on loan terms and faces foreclosure. A lender offers to save you by refinancing your mortgage and lowering payments. What that lender does not tell you is that you are only paying monthly interest each month. At the end of the term of the loan, there will be a balloon payment or a lump sum. If a homeowner cannot make that payment or refinance, they lose the home.

You've fallen behind in your mortgage payments and may face foreclosure. Another lender offers to save you from foreclosure by refinancing your mortgage and lowering your monthly payments. Look carefully at the loan terms. The payments may be lower because the lender is offering a loan on which you repay only the interest each month. At the end of the loan term, the principal-that is, the entire amount that you borrowed-is due in one lump sum called a balloon payment. If you can't make the balloon payment or refinance, you face foreclosure and the loss of your home.

If you are in the position to consider a home equity loan, research loan rates and lenders to make sure you are getting the best rate. Research lenders to make sure they are legitimate and reputable. Never sign paperwork that you do not understand. Do your homework to make sure you are not stripped of your equity.