Posted Jul 03, 2007 07:33 pm CDT
Updated: Homeowners facing foreclosure are falling victim to a scheme known as equity stripping.
The New York Times describes the scheme this way: A company promises struggling homeowners it will give up-front cash and free rent to help them stay in their homes. Then a new purchaser takes over the deed, borrows against the value of the home and keeps the money.
Lawyer Jessica Attie of South Brooklyn Legal Services told the newspaper that her office has been overwhelmed with victims who turned over deeds to companies claiming they can avert foreclosures.
A lawyer from the Legal Assistance Foundation of Metropolitan Chicago told ABA Journal reporter John Gibeaut that he is hearing more and more complaints about mortgage rescue companies. (See “Mortgage Fraud Mess” in the July 2007 issue.)
“In the last two years, we’re seeing more and more of this, and we’re filing more and more cases,” said supervisory attorney Daniel Lindsey. “What they’re doing, by hook or crook, is getting the homeowner’s title. In reality, very few people get their homes back and they lose the equity in them, because that’s what it’s all about—sucking the equity out.”
At least seven states have responded to the problem with laws barring rescue-mortgage companies or giving victims legal remedies.
Originally posted 07-03-2007 8:33 AM.