Low income families are often targeted and drawn into a scheme by louche lenders where high risk loans meant to fail and lead into a foreclosure. Equity skimming which is a foreclosure rescue plan that help those families who are in such a situation is really a scam and a way to prey on the ignorant. In this scheme the private lenders or companies take control of the foreclosed homeowner’s property though allow them to continue their life there as tenants.
The assurances are false and the property is given away in equity, hence the name ‘equity skimming’. Do not confuse those who are in fact helping low-income families by applying the same general principle but following through; it is also the case that there are honest lenders as much as there are dishonest, the dishonest intent on obtaining money that is not obtained fairly based on hard work. Several states have been taking action against those who mislead.
The term is often used in a subprime lending environment. It is used to describe the unscrupulous and excessive charges in fees out of the home. Some do no consider this a predatory way of garnering income because the method is similar to foreclosure rescues, do not let the facade confuse you, there is nothing selfless about these predators.
Unfortunately it is not uncommon for those who are low-income or newly unemployed to be taken in when their life is crumbling under their feet. The most likely to participate in such a scheme include large companies, banks, or national companies. It is the case that lending by local agents and investors will be beneficial and have the individual’s best interest at heart. To understand the process of stripping, one has to know how it operates on a basic level. A typical transaction includes an investor of residential property will purchase the home for a fraction of the market worth, the interest incurred by the owner’s debt is paid off by said purchaser at which point the house is then sold at a high price. That is to say that if in this market it is able to be sold.
This works out for both the new owner and the previous one, the previous owner would not be able to live debt free if not for this transaction. This is not a mutual gain if the former owner still wishes to reside. Equity strippers move to convince the owners that their house may be returned to them if they were to endeavor them to their cause. They manage to gain money from the ignorant, a “foreclosure reconveyance”. The states protect the citizens by dictating that all paperwork should be documented in a written contract that must contain all information pertaining to the situation and all hidden fees. The companies must also provide a note of cancellation to the contract; if these regulations are not strictly adhered to the contract is null and void. For instance it must be proven that the one under contract is able to pay the fees associated, that it is reasonable. This is the protection that is given under state.