Here’s the latest mortgage scam – “equity stripping”. Of course, equity stripping is what homeowners have been doing themselves for more than ten years. Until the early ’90s, the typical homeowner owned nearly 70% of his house, free of debt. Now, the figure is only 52%.
But now, as the housing slump deepens, more and more homeowners are faced with losing their houses. The American Bankers Association says that 19% of subprime mortgages are either delinquent or already in foreclosure.
This has created a whole new mini-industry – helping people save their homes. Fast-moving finance companies read the published lists of houses entering the foreclosure process. They visit desperate owners, offering to restructure mortgages in order to prevent foreclosure. Then, they get owners to sign the houses over to the finance company, which strips out any remained equity – and then some. When the homeowners finally realise what has happened, they find themselves even deeper in debt… and the finance company no longer answers its phone.
The Daily Reckoning Australia