Buy a Home to Bail on Your Current Home. New Face of Foreclosures.

You’d be surprised what is going on in the current housing market.  Many people are now trying a new technique by bailing out on their current home in order to purchase a new home while their credit is good.  If you do the math, it would make sense at least from the buyer/seller perspective.  Say you bought a $600,000 home at the peak which is now only worth $300,000.  You’ve been diligently making your payments so your credit is still good.  You see a similar home selling for $300,000.  You decide to buy the $300,000 home, and then try to sell you $600,000 home with little concern of whether it sells or not.  Your credit will be ruined but at least you’ll have a new place and for most people, good credit is all about being able to buy a home.  This of course is illegal but that hasn’t stopped people this decade:

 “(WSJ)  In markets hit hardest by falling home prices and rising foreclosures, lenders and brokers are discovering a new phenomenon: the “buy and bail,” in which borrowers with good credit buy a new home — often at a much lower price — then bail out of the “upside down” mortgage on their first home.

Homeowners are able to pull off this gambit — which some lenders and real-estate agents call mortgage fraud — by taking advantage of mortgage-lending practices that allow them to buy a new primary residence before their existing residence has been sold. And with the lending industry in disarray as it tries to restructure millions of mortgages, some boast they are able to pull off the strategy with ease.

In some cases, homeowners are coached through the buy-and-bail process by real-estate agents and brokers who see nothing wrong with it. Some blame the phenomenon in part on lenders’ unwillingness to cut deals or restructure loans made when home prices were inflated. “It’s just a business decision,” says Linda Caoili, a Sacramento real-estate agent who is working with Ms. Augustine and others who are considering walking away from their mortgages. “If you’re upside-down $250,000, why would you keep it? It just doesn’t make sense.”

Welcome to the new housing market.

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