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Some Buy a New Home to Bail on the Old
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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.
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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.
Of course they don’t - they get the closing and initiation fees.
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