My cat started doing this about a year ago - on her belly.

My vet gave me these little pink pills for "anxiety" and they really
worked.  Although I didn't know what was more tramatic, whatever her
reason was for doing the overgrooming, or popping pills down her
throat every night.  

Then a few months ago I was talking about this with a co-worker who
asked what kind of litter I was using.   It seems his cat was using a
litter (the same we were) and had a reaction to it so they switvhed to
Arm&Hammer litter and the cat stopped the overgrooming.

We've switched and so far she's stopped doing the overgrooming on most
areas, but there is still a patch on her belly that is just about bare
(she's never gone to the point of bleeding).

Bill

A bit more than a year ago our 11 years old cat Velvet suddenly developed
what sounds like the same problem.  Over-grooming not only her tummy but the
backs of her legs as well.  After numerous trips to the vet, (embarrassing
collars, flea treatments, spraying with water to stop the behaviour) she was
still at it, progressing until she actually had open oozing wounds at the
areas.

The vet decided to try a steroid injection, "Depo Medrol".  It was
miraculous, she started to heal, all the hair grew back, Halleluiah!!!
Approximately 2 months later it started all over again.  This time we went
straight for the injection, it stopped.  We still don't know what causes it.
We have 3 other cats and a Labrador, none of which are affected by this.
Now when ever we notice bare patches developing on Velvet we just take her
in for a shot.   It costs us about $6.00 Canadian for each visit (money
extremely well spent)

Hope this helps, best of luck

Beverlee