This Tip provides information on how to spot an Equity Stripping case under Minn. Stat. § 325N, when the client has been involved in a foreclosure reconveyance scam, also known as equity stripping.


Equity Stripping may take many forms, but the scheme typically includes a person who purports to offer to “save” the homes of homeowners with substantial equity in their homes who are faced with foreclosure, and help the homeowners remain in their homes.  In reality, the objective is to obtain title to the home, extract as much money from the former homeowner as possible, and then evict the homeowners as quickly as possible so they can resell the home for its full market price, typically tens of thousands of dollars more than they paid to redeem it.

In response to the problems of foreclosed homeowners loosing their equity to equity stripping scams, the Minnesota Legislature passed Minn. Stat. § 325N, and this law went into effect August 1, 2004.  This law does two things; it regulates “foreclosure consultants” and “foreclosure reconveyance transactions.”


Minnesota Statute§ 325N.10 – 18 establishes the elements of an equity stripping claim.  Look for the following facts:

  1. Client previously owned their home.  The definition of home includes a condominium, the property must be residential and must be the primary residence of the client.
  2. Client’s home was in foreclosure at the time of the transaction.  If the client was not actually in foreclosure at the time of the transaction, then it does not fall within this statute. Please note that some “equity strippers” will identify potential victims before the home enters the foreclosure process.
  3. Someone other than Client has obtained title to the home.  Title could be transferred by the creation of a mortgage, creation of a lien or encumbrance that allows the property to be redeemed as a junior leinholder, or a transfer interest from the foreclosed homeowner.
  4. Client conveyed their home based on a promise of subsequent reconveyance.  This promise may take the form of a contract for deed, purchase agreement, option to purchase or lease.  Most importantly, the reconveyance MUST include a right to possession by the foreclosed homeowner following the conclusion of the foreclosure process.
  5. Client continued to live in the home after the sale.
  6. The transaction took place after August 1, 2004.

Equity Stripping cases can be first spotted at many different points.  An attorney may encounter an equity stripping situation when the client has been served with an Eviction Action Complaint or a Notice of Cancellation of Contract for Deed.  If you spot a case that seems to have the elements listed above, have the client call Legal Aid’s intake number:  612/334-5970 to be screened for Equity Stripping, and possible subsequent representation by an attorney on our Equity Stripping Task Force.

Please Note:
Not all equity stripping cases fall within Minn. Stat. § 325N, and some of these cases still may have valid consumer protection claims.  If you spot a case that is close to meeting the above criteria, please do not hesitate to direct the client to call 612/334-5970 to be screened.

Submitted by: Darielle Dannen
Housing Law Resource Attorney
Volunteer Lawyers Network