Home Equity Stripping
Minnesota Attorney General’s Office 1400 Bremer Tower 445 Minnesota Street St. Paul, MN 55101
(651) 296-3353 1-800-657-3787 TTY (651) 297-7206 TTY 1-800-366-4812 www.ag.state.mn.us
From the Office of Minnesota Attorney General Lori Swanson
Home foreclosure is every homeowner’s worst
nightmare. One result of the poor economy is that many
people are having a hard time making mortgage
payments, and the number of foreclosures is growing.
Unfortunately, there are people looking to take
advantage of homeowners forced into foreclosure.
Because of the rise in home prices, many people in
foreclosure still have significant equity in their home.
Equity is the difference between what you owe on the
home and the amount you can get from selling the home.
For example, a homeowner with a house worth
$150,000 who owes $80,000 on a first mortgage and
$20,000 on a home equity line has about $50,000 in
equity— which is the $150,000 home value minus the
$100,000 in loans.
Foreclosed homeowners with equity need to watch out
for scam artists who try to take all the equity from the
homeowner. This is known as “equity stripping.” The
scam works in a variety of ways, but it usually starts
when someone promises the homeowners that he will
solve all their problems and keep them in their home.
The scammer promises loan money that never appears,
or has the homeowners sign a lot of complicated papers.
The end result often is that the homeowners end up owing
more per month than before the foreclosure and are
quickly forced out of the house. In most cases, the
homeowners receive little or nothing for their home equity.
On April 28, 2003, the Attorney General’s Office filed a
lawsuit claiming that Home Funding Corporation
(“HFC”) and other defendants “stripped” the equity from
many Minnesota homeowners in foreclosure. The lawsuit
states that HFC ran newspaper advertisements offering
help, including loans, to homeowners in foreclosure.
HFC, however, never really gave anyone a loan. Instead,