Buy And Bail On the Increase
A report on Bloomberg indicates that the housing and debt crisis in the U.S. is far from over, as instances of so-called ‘Buy and Bail’ are on the increase.
Buy and Bail consists of acquiring a new house before the buyer’s credit rating is ruined by walking away an existing mortgage loan because it is “underwater” – i.e. worth less than the mortgage. It’s an attempt to escape payments on a home whose value may never recover while securing a new property, often at a lower price with a more affordable loan (and almost always with a different lender).
After falls in house values since 2006, something like 20% of home loans in the U.S. are “underwater”, meaning the house is worth less than the loan. As a result, more people are looking at ways to walk away from loans and approx. 12% of mortgage defaults are ‘strategic’ (deliberate), according to the report.
There is still a long way down yet, it would seem.
Read the full article here: http://www.bloomberg.com/news/2010-08-10/-buy-and-bail-homeowners-get-past-mortgage-hurdles-from-fannie-freddie.html
