It works by taking out another loan to pay off the mortgage loan. It's idiotic. At best, it's moving money around for no net gain. At worst, it's costing you a bunch of fees and maybe a higher rate as well.
If for some reason you have a relatively high interest mortgage (say, 6%+) you can easily just refinance the loan. No need for anything fancy or weird.
It's a scam in the sense that someone else is making money off you, and you're not benefitting. It's not as bad as 3-card monty or guessing which walnut shell the pea is under or wiring money to a Nigerian prince, but it's not good either.
-W