Fannie Cracks Down On Homeowners Buying 2nd Home Before Walking Away From 1st Home

In San Diego County, California, North County Times reports:

• One of the nation's largest lenders is cracking down on borrowers who let their homes enter foreclosure ---- a phenomenon that has spawned several North County businesses catering to homeowners who want to "walk away."

• Fannie Mae, a government-chartered lender, instituted guidelines June 25 that limit the loans a homeonwer can secure when purchasing a second home. As home prices plummet in San Diego County, local real estate agents say more homeowners are looking to purchase similar homes for hundreds of thousands less and then let their original home fall into foreclosure.

• "It's the duck and weave," said Christopher Thornberg, an economist with Beacon Economics. "You're looking at (a similar house) down the block listed at half of what you bought (your house) for, so obviously the best move financially is to move from your house to that one."

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• [L]ocal real estate agents say an increasing number of their clients are asking about buying another home for cheap with no intention of keeping the first home. Agents said the homeowners typically do not intend for the first home to enter foreclosure, but instead hope to short sell the home, or sell it for less than the balance on the mortgage with the bank's approval. If the home cannot sell, it will then fall into foreclosure.

For more, see Fannie Mae cracking down on 'walk aways' (New guidelines make it more difficult to purchase a second home).

In a related story on "Buy and Bail" home purchases, see:

• The Wall Street Journal: Some Buy a New Home to Bail on the Old (Fannie Plans Rules To Avoid Practice Described as Fraud). BuyAndBail