An elderly homeowner has significant equity in her paid-off home. A lender convinces her to take out a series of high-cost home equity loans for unnecessary home repairs, each time reducing her ownership stake. This practice is known as:

Correct answer: Equity stripping

Equity stripping is the predatory practice of systematically eroding a homeowner's equity through excessive fees, inflated loan costs, or unnecessary loans that benefit the lender rather than the borrower. Targeting elderly homeowners with significant home equity is a classic equity stripping scenario. Redlining involves denying credit based on neighborhood demographics. Yield spread premiums relate to broker compensation tied to interest rates. Negative amortization occurs when loan payments are insufficient to cover interest, causing the balance to grow.