Equity grabbing refers to the unethical practice of lenders who give out predatory loans to gullible borrowers with the hidden intention of acquiring ownership of the borrower’s equity in a property when default occurs.
This means that the lender’s strategic agenda was not to make a profit from interest in the first place but to include terms in the lending contract that can induce default when invoked, then proceed with acquisition of equity based on that premise.
The most common terms that causes defaults in future are usually associated with sudden interest rate spikes, especially with teaser rate loans.
Such lending contracts drafted by equity-grabbing lenders would undoubtedly heavily favor the lender from a legal perspective.
Victims of such practices would usually either have a highly valued property, or one that has a lot of sweat equity in it.
When being victimizes, borrowers might be able to obtain some protection from the courts by claiming the loan agreement to be an adhesion contract.
However, protection is never guaranteed. Prevention is better than cure.