Twice duped during the housing bubble

Say what you will about every individual being responsible for their own decisions and that the free market must be allowed to work unfettered, but it does seem unfair that a large segment of the home buying public is getting fleeced twice during the current housing bubble - first when they took out their subprime loan to purchase a home and then again when they thought they were saving it from foreclosure.

This story in the New York Times goes a long way in explaining what those ubiquitous little "Stop Foreclosure" and "We Buy Houses" signs that you see by the side of the road are really all about - they're all over the place in California and they almost all Habla Espanol.

New Scheme Preys on Desperate Homeowners
By GRETCHEN MORGENSON and VIKAS BAJAJ

With the housing market in decline, financial predators are finding yet another way to take advantage of people who fall behind on their payments.

The schemes take various forms and often involve promises to distressed homeowners of cash upfront, free monthly rent and a chance to retain their houses in the long run. But in the process, someone else takes over the deed, borrows as much as possible against the value of the house and pockets the cash. And, almost always, the homeowners still end up losing their homes.

There are no nationwide numbers on this common fraud, known as equity stripping, but it has turned up in almost every state. Seven states have passed laws to try to stop it. Still, with foreclosure rates rising rapidly, it will be a growing problem, consumer advocates say.

“Conditions now are perfect for these scams,” said Lauren K. Saunders, managing attorney at the National Consumer Law Center in Washington. “We are at the end of a period of rising real estate prices, so a lot of people have equity in their homes. But we also have a foreclosure crisis.”

Historic highs in home equity and foreclosures - imagine that.

Sometimes you have to wonder how so many pundits can keep a straight face when they marvel at all the "wealth" that has been created in the last five years.

It's like a cruel joke for millions and millions of people who really had no clue of the bigger picture and not only achieved their dream of home ownership but thought they were gonna be rich too!

It's now ending in tears for many of them who were just doing what everyone else was doing - at least they'll have company when they tell their housing stories in the years ahead, "Yeah, I bought a house in 2006 too. I thought I was gonna get rich. Didn't happen."

Victims are becoming more plentiful as homeowners fall behind on payments and find that they cannot refinance, with mortgage rates rising. The Mortgage Bankers Association recently disclosed that nearly 19 percent of all loans to less-creditworthy consumers, or 1.1 million mortgages, were either delinquent by more than 30 days or in foreclosure. At the end of 2006, the figure among these loans was 17.9 percent.

When a property enters foreclosure, it appears on a list at the county clerk’s office. Individuals and companies in equity-stripping schemes monitor the lists closely, contacting troubled homeowners either by phone, by mail or by knocking on their doors.

These companies advertise heavily in target areas. “Are you losing sleep because of mounting debt and harassing bill collectors?” asked one flier from a “foreclosure specialist,” Equitable Real Estate Solutions.

"Equity-stripping". Another addition to the early 21st century vernacular - following "flipping" and "subprime".