Which of the following describes equity stripping?

Equity stripping refers to a practice that diminishes a borrower's equity in their property, making it the correct choice. This is often achieved by providing loans that are secured by the borrower's home but are structured in a way that allows the lender to take a significant amount of the equity or even put the borrower at risk of foreclosure. Such practices may involve high-interest rates, excessive fees, or unnecessary refinancing that strips away the financial stake a borrower has built in their property.

Understanding this concept is vital for mortgage professionals, as it highlights the importance of ethical lending practices and the need to protect consumers from predatory lending that can leave them financially vulnerable. In contrast, the other choices refer to beneficial actions like improving property value or obtaining cash through refinancing, which do not align with the damaging nature of equity stripping. Recognizing the distinct implications of equity stripping helps ensure responsible lending and consumer protection in the mortgage industry.