Using personal line of credit for friend who is a builder

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A family member is thinking of using their line of credit on their paid-off house for a friend who is a builder. I am curious if anyone has ever heard of or done this before. Apparently, when the house is built the family member will quit claim the house back to the builder. Also, the builder pays the family member 1%. I wonder about the risk involved as I have not heard of this type of transaction before.