Homeowner "Buy & Bail" - The New Housing Scam?

The Wall Street Journal reports:

• 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.

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• 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.

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• While buy-and-bail is on the rise, the practice doesn't appear to be widespread.

For more, see Some Buy a New Home to Bail on the Old (Fannie Plans Rules To Avoid Practice Described as Fraud).

Go here for other posts on "Buy and Bail" home purchases. BuyAndBail