Okay, maybe the rhyming title doesn’t make it sound as serious as it is, but if you’re considering this approach to escaping your underwater mortgage in Idaho, you should think twice. If you haven’t heard of the “buy and bail” approach, here’s the down and dirty:
An Idaho homeowner has a mortgage on a home that far exceeds its value. It doesn’t take long to realize the home they bought can be picked up at a huge discount in today’s market or, better yet, they can get an even bigger one. So they go to a lender and take out a loan to purchase another home. Once the purchase is complete, they let their first mortgage go into foreclosure.
This may sound like a simple idea; however, most lenders have cracked down on the practice. Idaho homeowners trying to buy a second home have probably already figured out the number of hoops underwriters require you to go through to do this. Fannie Mae has seen a huge increase in the number of homeowners who fail to pay their mortgage soon after purchasing a second property. FHA (Federal Housing Administration) has now implemented changes to guidelines that don’t allow for rental income to count toward qualifying for mortgages on second homes for purchases made after September 19, 2008.
So the lenders have made it clear that they’re well aware of “buy and bail” practices, but you may be wondering what the actual consequences are? According to the following excerpt from the FBI’s website regarding mortgage fraud:
I’d say it’s pretty serious stuff. If you own an Idaho home that has lost a significant amount of value due to the market declines, you may still qualify to sell the home in a short sale or possibly a loan modification through your lender without committing mortgage fraud.
In cases where your Idaho home may have lost a significant amount of value, many financial analyst have stated that a homeowner could recover financially more quickly through foreclosure alternatives like short sales or deed in lieu of foreclosure.
What do you think is homeownership worth doing time in prison?
