I have been told that the people "scammed" were aware that home equity loans were being taken out on their homes and the money supposedly invested to give them more money as well as a lower interest rate on their mortgage. Is that the case? If so, why don't these folks think they should be on the hook for the equity that was taken out of their homes? I think I am missing something. Do you know how this all was supposed to work?

While what this lender did was very wrong I yet to hear anybody comment on the ignorance of the 'victims'. This was greed pure and simple but not just by the mortgage lender. This was all made possible by the continuing greed of the borrowers lining up wanting something that common sense would have told them was too good to be true.

I sympathize with the people that got screwed but didn’t anybody read anything that they were signing?

Here's the plan...as I understand it.
You are a borrower with a large down payment, 40% we'll say, meaning you needed to borrow 60%. Current market rates are 6% yet at this lender you could get 4.5%. Great deal? Instead of borrowing the 60% that you need you are informed to get the lower rate you need to borrow an additional 20% (80% total). The company then uses that additional 20% to invest. The proceeds of those investments covers the difference in the mortgage interest and any excess is profit to the company. Works well as long as the investments are making money. When they are not, well, we saw what happens then.
A couple of common sense things I would question though?

If my loan with with Chase, why am I making my payments to the mortgage broker?

If I paid off my loan 6 months ago why didn't I get the satisfaction in the mail from the courthouse?

If this company goes out of business what happens to the extra 20% invested?
In one form or another many people set themselves up to get screwed because they focus on only the one thing they (or society, media, etc.) think is important and all other common sense goes out the window. Buying a car...what's my payment, nothing else matters. Getting a mortgage...what's my rate, nothing else matters. Everything else matters! People need to be more proactive in learning about what they are getting into and looking at the big picture.
There is a lot of truth to 'if it's too good to be true, it probably is'

It is true that the only people who got scammed by this guy are people who are big time savers. That is what makes it so tough for these people. He would not even talk to you unless you had at least 50% down on your house. It had absolutely nothing to do with people getting in too much house than they could afford.

The idea is not that far off from being legitimate. It actually worked for him for many many years. There are a number of things that cause it to fall apart just in the last year. One was that his other business ventures were failing along with only mediocre returns on stock investments. That along with keeping up his on lifestyle made the whole thing fall apart.

The fact that he was using this money to bail out his other businesses makes me think that there will be very little money available to pay back these people he scammed.

Any investments has to do with where you want to place your risk. If you have a 100K loan on a 200K house you probably could take out a mortgage with another 50K if you wanted to. What are home equity loans going for now? 6 or 7%? Most people would say that a mutual fund getting 6 or 7 percent is a poor performing fund over the long term. Most average funds will return at least 10 and should be getting up to 15% on a the long term but there is always risk associated with doing any investment. A financial planner will sometimes recommend you max out what you can afford on a monthly payment and then use the extra cash you get to make sound investments. This is smart thinking but you have to be disciplined not to spend this extra cash on cars and furniture.

What Snyder was doing was offering to take the risk off the person to do investing for them with their extra money from the mortgage. If Snyder could have been trusted it should have worked very well which is why i think it worked for so many years. Straight pyramid scrams don't last more than 1 or 2 years.

Thank you, you guys for clarifying. That makes a lot more sense than the "they shouldn't buy a house they can't afford" angle because they could definately afford it. So they really got caught in an investment scam which isn't all that unusual. If it sounds too good....