Buy and Bail

NEW -> Contingent Buyer Assistance Program
profette_IHB

profette_IHB

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<strong>Some Buy a New Home to Bail on the Old</strong>



<em>Fannie Plans Rules

To Avoid Practice

Described as Fraud</em>



"Next month, Michelle Augustine plans to walk away from her four-bedroom house in a Sacramento, Calif., subdivision and let the property fall into foreclosure. But before doing so, she hopes to lock in the purchase of another home nearby.



'I can find the same exact house as what I live in right now for half the price,' says Ms. Augustine, 44 years old, who runs a child-care service out of her home. She says she soon will be unable to afford her monthly payments, which will jump to $4,000 from $3,300 in August, and she doesn't want to continue to own a home that is now worth $200,000 less than what she paid for it two years ago..."<a href="http://online.wsj.com/article/SB121314811278463077.html?mod=yhoofront">More from the WSJ</a>
 
I think there might be more urban legend to this than real story. As much as lenders have tightened up here lately, I think this is a lot harder than it looks.
 
You can do it if you aren't married. Or you have a company purchase it versus you purchase it - but that's a different story.



I could see you doing it a while back, but nowadays, you HAVE to walk in with big cash.



-bix
 
So, what if someone had a HELOC and withdrew what was left and used it on a downpayment on the new home and then walked away from the first house? Just curious if the timing of this would allow this possibility.
 
[quote author="no_vaseline" date=1213311281]I think there might be more urban legend to this than real story. As much as lenders have tightened up here lately, I think this is a lot harder than it looks.</blockquote>




But isn't this what everyone was saying about jinglemail a few months ago? Seems as if people walking away is pretty well accepted at this point, no?
 
FreedomCM, I think the variation to this is that earlier everyone assumed the person giving up their home would have to rent for several years as their credit went to sh!t. That was the trade-off - you can drop the depreciating asset but you lose your "homeowner" status.



But if timing and lenders permit these owners to take any equity they may have left and/or enough credit to buy a similar house before they mail back the keys to the first house there is no downside to walking away financially or quality-of-life wise.
 
Jinglemail requires you to pack your shit up and leave.



Buy and Bail requires loose lending standards (so loose that they look the other way on your property you're obviously upside down on).



ModM and LM could (probablly shoud) comment further, but banks are pretty stupid rigourous about verifying stuff now, where before they didn't care. The ammount of neg am stated income stated asset loans that were given to folks without valid social security numbers is stunning.



My pool is pretty small, but the fact it happened at all is scary.
 
I spoke to a cab driver in Vegas who was doing a variation of this. Apparently he and his sister bought a house together a few years ago that has now depreciated significantly so they were going to walk on the mortgage. Since the cabbie's sister wasn't on the mortgage he was going to take the hit on his credit and use his sister's credit history to buy a new house. He also noted the mortgage on the new house would be "less than renting" so it sounds like he learned something from the experience.



It was a strange taxi ride... I'm in the guy's cab less than 5 minutes and he tells me he's going into foreclosure!
 
I handled a radio call a few weeks ago in the hills off of Laurel Canyon in HWD (we're talking 1.5 mil easy). The renter had just experienced a little payback from the former plumber...who hadn't been paid by the actual homeowner. Seems the plumber did major work, wasn't paid by owner...then came back for some retribution.



Plumber entered the property, accessed the crawlspace....and punched pinholes in the copper plumbing...using some sort of punch tool...obviously caused severe drop in water pressure and a small flood below the house. Thought he was going to get away with it, but renter was home and saw him oddly loitering about the property and confronted him.



Getting to my point....During my interview with renter, he admitted to knowledge that the actual owner was in foreclosure. Said owner planned on scamming the bank somehow....walking away from house, but simultaneously buying it back under another company name....at a significantly lower price. Not sure how he could arrange such a thing, but it seems to be happening more and more frequently.



Civil matter at this point....but bordering on criminal if you ask me. If it was up to me, I'd arrest on fraud.
 
If the banks would accept cramdowns, this sort of thing would happen

less. Not the plumber thing. Poor plumber's lien rights (or whatever he

has in California would be wiped out by foreclosure). Not that he should

have damaged the house, but I understand why he's mad.



Hmm, he could create a corporation, here you don't have to own any

shares to be president, have someone else be pres. He'd have to capitalize

it heavily though. And typically, you'd be required to have someone sign the

note personally, and usually a guarantee. Couldn't be the guy, unless the

lender is too stupid to check the guy's individual credit. If he could

heavily capitalize a corporation, would he be in bankrupcy?



I don't see how it could work. It would be no different from using someone

else's credit to buy a house.



Lenders have persuaded people that their house is an atm and now they're

upset that people were convinced to think of it that way. I know someone

who put a lot, really a lot down on his house, but in Miami-Dade is still

underwater. He intends to heloc it and then walk!!! I don't see how the

house will appraise out, but if it does, well, the way he thinks about it

is he put a lot of money in and now he is accessing his account.



Trust me, this stuff is not an urban myth. I'm small potatoes, but I'm running

into it enough that I know it isn't a myth.
 
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