Buy and Bail questions

[jakelabry]

Okay, tell this to the lender "After you approve and fund this loan, I intend to move into the new house and deliberately foreclose on the other one." Would that influence their decision to give you the new loan? Absolutely, just ask CuriousGeorge who DID say that to a lender. That, my friend, is an omission "that would be relied on by an underwriter to fund, purchase, or insure a loan." An individuals credit history and/or performance in regards to the debts they are currently servicing is a "fact" that lenders rely on when making their decisions. Don't ask a lender (or this forum) - call your local FBI office.

The fact is that the chances of an individual homeowner being prosecuted for buy and bail are very slim - as are the chances of the OP being approved for this new mortgage. He would either have to furnish a rental agreement for the old house, or meet underwriting guidelines to support both mortgages. Many lenders will no longer accept rental income at all when approving new loans so that leaves the later scenario for this new mortgage.

Finally, given that the overwhelming majority of mortgages are now government owned (Housing Market Faces Hard Road to Normal, Fed Economist Says - Bloomberg.com), this is not screwing the lender that screwed me, it's screwing the taxpayers and we don't deserve it.

[knownick]

Originally Posted by jakelabry

Okay, tell this to the lender "After you approve and fund this loan, I intend to move into the new house and deliberately foreclose on the other one." Would that influence their decision to give you the new loan?

And if I "intend" to keep the house and get a loan modification? Then what? Is the fraud eliminated based solely on my intent? Intent is easy to change.

Absolutely, just ask CuriousGeorge who DID say that to a lender. That, my friend, is an omission "that would be relied on by an underwriter to fund, purchase, or insure a loan."

Again, we're talking intent here vs. omission of material fact. What of someone who knows that their company is downsizing and they're likely to lose their job in six weeks? Did they commit fraud by securing a mortgage before that happened? What about someone who knew they were going to voluntarily quit and go into business for themselves, but wanted a mortgage before embarking on such a quest? Fraud?

An individuals credit history and/or performance in regards to the debts they are currently servicing is a "fact" that lenders rely on when making their decisions.

Most definitely. Credit HISTORY. His credit HISTORY is there for anyone to see. Lenders basing decisions on credit FUTURE is a little bit sci-fi, don't you think?

[jakelabry]

Originally Posted by knownick

And if I "intend" to keep the house and get a loan modification? Then what? Is the fraud eliminated based solely on my intent? Intent is easy to change.

Is fraud based on intent? Absolutely - but bad example on your part. Modifications require hardship - you just got approved for another mortgage for a second house. DENIED!

Originally Posted by knownick

Again, we're talking intent here vs. omission of material fact. What of someone who knows that their company is downsizing and they're likely to lose their job in six weeks? Did they commit fraud by securing a mortgage before that happened? What about someone who knew they were going to voluntarily quit and go into business for themselves, but wanted a mortgage before embarking on such a quest? Fraud?

Fraud - oh you better believe it! Again, tell the lender your intentions or those pesky little facts you are omitting. "Oh by the way, my company is going out of business in six weeks, can I still have the loan?" That one is pretty easy to prove too - most companies provide notice of downsizing in writing so you'd have a hard convincing somebody you didn't know. The second one may be a little harder prove but IMO, it is still fraud. Again, present these same scenarios to a bank. Tell me what they say. If you get the mortgage then you haven't committed fraud because you disclosed everything and they made the decision it was worth it.

Originally Posted by knownick

Most definitely. Credit HISTORY. His credit HISTORY is there for anyone to see. Lenders basing decisions on credit FUTURE is a little bit sci-fi, don't you think?

Your credit history is THE predictor of your credit future used by lenders. The three C's of lending; Credit - do you have a history of paying up and therefore can be counted on paying them in the future? Capacity - do you make enough money? Collateral - that's the house. Not sci-fi at all.

[auroraproblem]

Fraud - oh you better believe it! Again, tell the lender your intentions or those pesky little facts you are omitting. "Oh by the way, my company is going out of business in six weeks, can I still have the loan?" That one is pretty easy to prove too - most companies provide notice of downsizing in writing so you'd have a hard convincing somebody you didn't know. The second one may be a little harder prove but IMO, it is still fraud. Again, present these same scenarios to a bank. Tell me what they say. If you get the mortgage then you haven't committed fraud because you disclosed everything and they made the decision it was worth it.

Not that I want to take sides....but honestly...did you look at the news prior to posting this example? General Motors did exactly that, asked for a government bailout and then bankrupt on all their suppliers. I mean come on, we only need look at businesses for the example of how to behave.

In this day and age, I believe each person must set their own rules of conduct on what is acceptable for their personal situation. We all know businesses are doing just that already.

[knownick]

Originally Posted by jakelabry

Fraud - oh you better believe it! Again, tell the lender your intentions or those pesky little facts you are omitting. "Oh by the way, my company is going out of business in six weeks, can I still have the loan?" That one is pretty easy to prove too - most companies provide notice of downsizing in writing so you'd have a hard convincing somebody you didn't know. The second one may be a little harder prove but IMO, it is still fraud. Again, present these same scenarios to a bank. Tell me what they say. If you get the mortgage then you haven't committed fraud because you disclosed everything and they made the decision it was worth it.

So your expert opinion is that the only way to not commit mortgage fraud in any of those scenarios is to only apply for and receive a mortgage when you have the utmost guarantee that your financial situation will not change down the road and you continue to base it on exactly the information you provided to the bank?

How long is the statute of limitations on this fraud? What if I "intend" to quit my job in 5 years and start my own business? Have I just defrauded the bank? After all, my mortgage is for 30 years! So where is the cutoff? 5 years, 5 months, 5 weeks? A full 30 years?

Sorry, that's not fraud. That's life. It happens. Mortgages are written based on your past and present. NOT FUTURE, since despite their best efforts, banks have thus far been unable to predict that.

Your credit history is THE predictor of your credit future used by lenders.

As it should be. The lender has every right to examine my credit history and current finances to make their decision. If I provide them with a full and complete financial picture and a copy of my credit history, then I've done everything they've asked.

If they look at that information and then decide that hmm, I might be a bit of a risk seeing how I own a home with a mortgage that's 50% larger than the home's value - and subsequently deny me, that's totally within their rights.

If they DON'T deny me, for any reason they might have, then that's on them. They accepted the risk - based on complete financial and credit information provided by me. Simple as that. Truthful disclosure of everything asked on the mortgage application = no fraud. Done.

[jakelabry]

Originally Posted by auroraproblem

Not that I want to take sides....but honestly...did you look at the news prior to posting this example? General Motors did exactly that, asked for a government bailout and then bankrupt on all their suppliers. I mean come on, we only need look at businesses for the example of how to behave.

In this day and age, I believe each person must set their own rules of conduct on what is acceptable for their personal situation. We all know businesses are doing just that already.

Feel free to live by whatever code of conduct you deem necessary. I don't have a a problem with that as long as you're willing to accept the consequences when your conduct results in a law being broken and you get caught. I prefer NOT to look to banks or my government as an example of how to behave

[azhardspot]

Jakelabry & Knownick

very intresting conversation and i have a question on a similar front (we live in AZ, community property law state)
If the HUSBAND is the only borowwer for Mortgage & is the only person listed on the TITLE of the 1stHOME

And the WIFE wants to buy the 2ndHOME all by herself

in that case

IS the WIFE even considered the homeowner for this 1stHOME since her name is not listed on the TITLE?
ANd is SHE even eligible to decide what happens with the 1stHOME since her name is not listed on the TITLE & MORTGAGE?

Essentialy do the standard 2 questions even apply to her (1-do u own a home, what will u do with it?)

thanks & god bless

[auroraproblem]

Originally Posted by jakelabry

Feel free to live by whatever code of conduct you deem necessary. I don't have a a problem with that as long as you're willing to accept the consequences when your conduct results in a law being broken and you get caught. I prefer NOT to look to banks or my government as an example of how to behave

Exactly, then why condemn him for what he wants to do or thinks is right? I personally care not to judge others that are on this forum. Most are here as a desperate measure, and when drowning, I can't entirely blame a person for swamping those trying to save them.

The argument that is going on in this thread is doing little to convince either side of what is right or wrong.

[dogatemy]

Originally Posted by jakelabry

What is "fraudulent," direct from the FBI website:

"material misstatement, misrepresentation, or omission relating to the property or potential mortgage relied on by an underwriter or lender to fund, purchase or insure a loan."

Federal Bureau of Investigation - FINANCIAL CRIMES REPORT TO THE PUBLIC FISCAL YEAR 2007

Seems pretty clear to me.

Of course it does! Clearly! It all makes sense now!

Sorry.. My sarcasm alarm just went off. It is a personal pet peeve of mine when someone drinks 2 cases of alcohol, vomits vehemently on their laptop and still posts the resulting "Report" on the internet. You know how I can tell? If you bother to browse that link and read it from top to bottom then you will not find a single citation of the actual law anywhere. This document was designed to scare you and now you're trying to use it to scare other people.

I know this is a little above 3rd grade reading but below is a full excerpt of 18 U.S.C. § 1014 which can be found using Google. Now.. I want you to find where it says, "material misstatement, misrepresentation, or omission relating to the property or potential mortgage relied on by an underwriter or lender to fund, purchase or insure a loan."

The fact of the mater is the law is very specific. The only place where you can be convicted of Mortgage Fraud is when someone, "knowingly makes any false statement or report, or willfully overvalues any land, property or security, for the purpose of influencing"..."any application, advance, discount, purchase, purchase agreement, repurchase agreement, commitment, or loan, or any change or extension of any of the same, by renewal, deferment of action or otherwise, or the acceptance, release, or substitution of security...".

There is absolutely NOTHING in the U.S. Code that criminalizes the behavior of verbally withholding anything! This includes pending job loss, the murder of your mother, your knowledge of the pending stock market crash or even letting your previous home go into foreclosure.

Plus.. there is one other little point you completely missed. If someone buys house #1 with loan #1 and is honest on their application, goes and buys house #2 with loan #2 then defaults on house #1.. even under your definition.. the buyer would still not be found liable because they still didn't omit any facts that would affect the solvency of loan #2. If the vomit above were accurate then it would solidify my stance that Buy and Bail is still not a crime.

§ 1014. Loan and credit applications generally; renewals and discounts; crop insurance

How Current is This?

Whoever knowingly makes any false statement or report, or willfully overvalues any land, property or security, for the purpose of influencing in any way the action of the Farm Credit Administration, Federal Crop Insurance Corporation or a company the Corporation reinsures, the Secretary of Agriculture acting through the Farmers Home Administration or successor agency, the Rural Development Administration or successor agency, any Farm Credit Bank, production credit association, agricultural credit association, bank for cooperatives, or any division, officer, or employee thereof, or of any regional agricultural credit corporation established pursuant to law, or a Federal land bank, a Federal land bank association, a Federal Reserve bank, a small business investment company, as defined in section 103 of the Small Business Investment Act of 1958 (15 U.S.C. 662), or the Small Business Administration in connection with any provision of that Act, a Federal credit union, an insured State-chartered credit union, any institution the accounts of which are insured by the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, any Federal home loan bank, the Federal Housing Finance Board, the Federal Deposit Insurance Corporation, the Resolution Trust Corporation, the Farm Credit System Insurance Corporation, or the National Credit Union Administration Board, a branch or agency of a foreign bank (as such terms are defined in paragraphs (1) and (3) of section 1(b) of the International Banking Act of 1978), or an organization operating under section 25 or section 25(a) ^[1] of the Federal Reserve Act, upon any application, advance, discount, purchase, purchase agreement, repurchase agreement, commitment, or loan, or any change or extension of any of the same, by renewal, deferment of action or otherwise, or the acceptance, release, or substitution of security therefor, shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both. The term “State-chartered credit union” includes a credit union chartered under the laws of a State of the United States, the District of Columbia, or any commonwealth, territory, or possession of the United States.

[jakelabry]

Originally Posted by dogatemy

I know this is a little above 3rd grade reading but below is a full excerpt of 18 U.S.C. § 1014 which can be found using Google. Now.. I want you to find where it says, "material misstatement, misrepresentation, or omission relating to the property or potential mortgage relied on by an underwriter or lender to fund, purchase or insure a loan."

Does this mean I can a add third grade reading level to my inability to construct sentences?

I truly regret it is not possible for you engage in any kind of discussion without becoming insulting. I also am very sorry you lost your house and got fired from your job. However, I am not personally responsible for either event. But I would like to offer you a little consolation prize for all the other failures in your life. I am officially withdrawing from this discussion and conceding defeat to your superior knowledge and vast experience (not to mention superior google skills). You win! I accept that I am an idiot - albeit an employed one with a paid-off house. Have a nice day. I must return to managing my network.

[dogatemy]

Originally Posted by jakelabry

Does this mean I can a add third grade reading level to my inability to construct sentences?

I truly regret it is not possible for you engage in any kind of discussion without becoming insulting. I also am very sorry you lost your house and got fired from your job. However, I am not personally responsible for either event. But I would like to offer you a little consolation prize for all the other failures in your life. I am officially withdrawing from this discussion and conceding defeat to your superior knowledge and vast experience (not to mention superior google skills). You win! I accept that I am an idiot - albeit an employed one with a paid-off house. Have a nice day. I must return to managing my network.

I was the one insulted when you decided that rather than read the law and argue the points... you take a cheap quote out of a bad PowerPoint. There are way too many people in these forums looking for good advice and such scare tactics are not helpful to anyone. If I do not stand up to this kind of non-sense then too many people will made bad decisions, hold onto their houses and end up not only under-water but MILES under-water. The best anyone can do right now, if they have the means, is to Buy & Bail. The more people who do it (within the confines of an accurate application) the better it is for everyone. It is not good for individual households or the economy as a whole to have a whole nation of house-poor people barely making it.

It was a nice attempt to take a parting shot. Good for you! I'm sure you're hoping for some kind of angry response. Now.. If you'll excuse me.. i'm going to go watch TV, pet the *** and drink some coffee. Life is tough.

[dogatemy]

Originally Posted by azhardspot

very intresting conversation and i have a question on a similar front (we live in AZ, community property law state)
If the HUSBAND is the only borowwer for Mortgage & is the only person listed on the TITLE of the 1stHOME

And the WIFE wants to buy the 2ndHOME all by herself

in that case

IS the WIFE even considered the homeowner for this 1stHOME since her name is not listed on the TITLE?
ANd is SHE even eligible to decide what happens with the 1stHOME since her name is not listed on the TITLE & MORTGAGE?

Essentialy do the standard 2 questions even apply to her (1-do u own a home, what will u do with it?)

The person on the title is the owner and the only way the wife can obtain any jurisdiction over the title is with a judge's order. So.. technically.. the answer is NO. She cannot decide what happens with the 1st Home.

[darlyj]

Ok dog, since you seem to know your stuff on this subject, I've got a couple questions for you if you don't mind....

If NACA and Chase don't come up with something soon, our family will be giving Chase the one-fingered salute as we drive away in the moving truck. We have a family member who is considering purchasing a larger home with some acreage for 20K less than we owe on our current 1st - essentially a much better deal - and doing an affordable, private mortgage with us. Whether it actually will happen or not, I'm not sure. The family member knows what our current situation is and we have not held any infomation about our finances or intentions back.

Where this would be a private (but drawn up by a real estate attorney) agreement between two individuals, would it remotely be a factor should Chase sell our current home? Would the private agreement be looked upon in the same light as an agreement with a bank? Since I am not on any of the paperwork for our current home would it be safer if only my name were on the private mortgage, on the off chance that it does actually materialize? Would it be better to draw up a rent or lease to own agreement? We just do not want to wind up getting screwed out of yet another (MUCH nicer) place, and ESPECIALLY do not want the generosity of a family member to land them in hot water. I've tried searching for information regarding private agreements between individuals but have not been able to find much about the subject in this particular situation. Thanks dog!

[cleach]

Originally Posted by darlyj

If NACA and Chase don't come up with something soon, our family will be giving Chase the one-fingered salute as we drive away in the moving truck.

I don't have anything constructive to add here, but this just CRACKED ME UP.

[darlyj]

Originally Posted by cleach

I don't have anything constructive to add here, but this just CRACKED ME UP.

Hey, glad I could give someone a laugh through all of this BS. I'm pretty sure the 4 and 5 year olds have the dexterity to pull it off, but the 2 year old may be a little young. Hmmmm -ya know, the Chase branch is right on the road we would be taking on the off chance this family thing works out. Hehehehe.


Sarcasm, people....I'm not actually gonna try to teach my 2 year old how to flip the bird.

[dogatemy]

Originally Posted by darlyj

Where this would be a private (but drawn up by a real estate attorney) agreement between two individuals, would it remotely be a factor should Chase sell our current home? Would the private agreement be looked upon in the same light as an agreement with a bank? Since I am not on any of the paperwork for our current home would it be safer if only my name were on the private mortgage, on the off chance that it does actually materialize? Would it be better to draw up a rent or lease to own agreement? We just do not want to wind up getting screwed out of yet another (MUCH nicer) place, and ESPECIALLY do not want the generosity of a family member to land them in hot water. I've tried searching for information regarding private agreements between individuals but have not been able to find much about the subject in this particular situation. Thanks dog!

If a real estate attorney is getting involved then the documents should be viewed in much the same way as a mortgage. You will receive a mortgage using the land/house as collateral. When the debt is paid in full then the lien on the land/house is removed and you own the land/house outright unless there is something different written into the contract (such as a lease to own which basically means you pay a lower amount throughout the contract then make a balloon payment at the end of the lease to pay off the debt and take ownership of the land/house.)

As for Chase.. the process is the same almost anywhere. Chase will foreclose when you give them the 1-finger-salute. If you live in a deficiency state then they will convert the difference between what is owed and what the house sells for into a debt then file a lawsuit to collect. If you live in a non-deficiency state then Chase will try to scare you into paying (or sell the debt to a collection agency and they will try to scare you into paying). Thankfully you're a member of the Loansafe forums so you'll know they are bluffing and you'll tell them to go away.

If Chase has the right to file a deficiency suit and they win then they will be entitled to all the collection rights usually granted to any creditor. They have the right to garnish your bank accounts (if they can find them), garnish your wages (if they can figure out where you work) or they can attempt to garnish your assets. Thankfully this only works for the big stuff like cars, houses, land and boats.

This leads to the discussion of your new house. Most states have a Homesteader Exception which prevents liquidation of your primary residence. If your new house is in a state with a Homesteader Exception and it qualifies for the Homesteader Exception then there is nothing they can do except possibly wait until it no longer qualifies for the Homesteader Exception.

For example.. I live in Arizona where the Homesteader Exception says that a judge may not order the sale of the primary residence if the home has less than $150,000 in equity. (I bolded the 'equity' part because most people miss that.) I was evicted from my previous house. I bought a new house. The new house cost $80k. I received a $50k mortgage. This means the house has $30k in equity. This exempts my new house from liquidation basically protecting it from creditors like Chase. This protection will last until my house rises in value enough that I exceed the homesteader exception. (As a side note.. this also protects the new house in the event I file for bankruptcy.)

So.. the question is.. What state are you in? What rights does Chase have in your state to collect? Is your only fear Chase taking your new house from you or is there another asset that you are concerned about?

My ultimate suggestion would be to take the loan docs from your previous house and the loan docs from your prospective new house to a reputable, sympathic attorney. My attorney was able to confirm my new house was protected from liquidation and provide some helpful advice on how to remain sane through the entire process. If your attorney starts getting moral on you or tries to scare you into something then immediately get another opinion.

I hope this helps!

[darlyj]

Thank you very much dog....it helps...a lot.

I forgot to mention that we live in AZ too - just north of Prescott. On the off chance that all of this did go through, I seriously doubt that the house and property would have 150K in equity above and beyond the note amount. My main concerns would be

1. Either my husband or family member getting into hot water over a generous offer and then
2. Having the house taken out from underneath us.

We have also discussed "renting" until this mess with Chase is over and done with, and having my family member put the rental money into an account which will then revert to a down payment on a mortgage at the appropriate time. If (and big if) this were to happen, we do trust this family member implicitly to live up to such a verbal agreement. Thank you again!

Oh how I LOVE this forum!

[StuckInAZ]

Originally Posted by darlyj

Where this would be a private (but drawn up by a real estate attorney) agreement between two individuals, would it remotely be a factor should Chase sell our current home? Would the private agreement be looked upon in the same light as an agreement with a bank? Since I am not on any of the paperwork for our current home would it be safer if only my name were on the private mortgage, on the off chance that it does actually materialize? Would it be better to draw up a rent or lease to own agreement? We just do not want to wind up getting screwed out of yet another (MUCH nicer) place, and ESPECIALLY do not want the generosity of a family member to land them in hot water. I've tried searching for information regarding private agreements between individuals but have not been able to find much about the subject in this particular situation.

I think dog fully answered your questions here, but I wanted to add that I am also most likely going the same route - having a family member provide a private, hard money loan to purchase a new residence. Doing so has the nice benefit of eliminating any complications with obtaining a new mortgage through a traditional lender as well as allowing us to claim a mortgage deduction at the end of the year. Per IRS rules, your loan from your private lender has to charge you at least a certain interest rate which fluctuates occasionally (I think it is around 4.5% for a long term loan if memory serves me correctly). Your private lender will claim the interest you pay them as income at the end of the year, but it sure beats having it in a 1.5% savings account. Also, you can write up the loan with any payment terms you want, such as interest only, 10/15/20/30 yr length, balloon payments, etc.


To the OP - listen to dog and knownick here. The lender has certain guidelines, as long as you meet the guidelines and didn't misrepresent yourself on the application then you are in the clear. Of course they can change their guidelines as they have done to prevent buy and bail type strategies. For most lenders today you either have to qualify for both mortgages (which btw is probably easier then it sounds with such ridiculously high DTI ratios STILL) or you have to have a signed rental agreement in place for your current place.

Additionally, I would add that it's not always about the guidelines and numbers, there is also a human factor. If you go and apply for a mortgage they may very well ask you to explain the reason for buying a new house, especially if it is smaller sq ft wise then the old house. It raises suspicions and if you don't have a good story in place then they could turn you down even if you do qualify. That said, every lender is different and you could very well find one that doesn't care and will push everything through to FHA/FNMA/etc. Choose your lender/broker carefully.

[dogatemy]

Originally Posted by darlyj

1. Either my husband or family member getting into hot water over a generous offer and then
2. Having the house taken out from underneath us.

I don't see how either of those things could happen. Chase cannot take ownership of a house that you don't own. They could put a lien on the house if they wanted too. If they do get a lien then they would be responsible for renewing the lien at their own expense every 5 years.

If I were you then I would put the new house in the name of 'spouse' of the owner of the former house. (Say that 10 times fast!) So.. If your husband was the sole mortgage holder on the previous house then put the new house in your name (or vice versa).

In any case I would still clear the documents with a sympathetic attorney.

Good luck! Sounds like your future is looking a bit brighter..

[Sparky06921]

A couple of questions in regards to this topic...

So you buy a 2nd house and stop payment on the first. How would the first know about the second mortage? Do a credit inquire and see the new mortage obligation? How would the FBI ever get involved? Would they file a report with the FBI?

Lots of scare tactics out there and I'm just curious as to what would ever draw a Federal look into your mortgage issue.

I know someone who is upside down and just got approved for a new home and is in escrow. They qualified for both mortgages but the lender still wanted to see a lease agreement and deposit check for the first house. They could provide that, but people back out of leases all the time. Just because someone provides a lease agreement and then later stops paying on the first, wouldn't it still be tough to prove fraud? You could just say your prospective tenant backed out. Right?

[dogatemy]

Originally Posted by Sparky06921

So you buy a 2nd house and stop payment on the first. How would the first know about the second mortage? Do a credit inquire and see the new mortage obligation? How would the FBI ever get involved? Would they file a report with the FBI?

Lots of scare tactics out there and I'm just curious as to what would ever draw a Federal look into your mortgage issue.

One of your lenders would need to report the 'fraud'. How does that happen? There are a couple of ways.

1 - You make the mistake of buying the second house with the same lender as your first house. You provide documentation showing the second house was rented then you bail on the first and move into the second. Of course it would be prudent for the lender to begin an investigation to find out if the rental contract was signed in good faith. This one is easy. If the prospective tenant is not related, not a friend, not a coworker and cancelled the contract legally then there is no evidence of wrong doing. The real problem develops when they do some digging and find the prospective tenant is a family member, friend or coworker. They still need to prove their case so unless they have some written evidence or they bring your friend in for interrogation and s/he throws you under the bus then there is still little they can do.

2 - Same scenario as #1 but your loans are both sold to the same person, company, investor or both loans are insured by the same PMI company.

3 - Most mortgage companies are not out for blood but if you tell them you plan to Buy and Bail then they may take this as a sign that you have something to garnish. From there they might begin an investigation to find out if you lied somewhere on your application. Bankruptcy is usually the magic bullet but the law also says...

A discharge in bankruptcy releases the debtor from all provable debts, except (1) taxes, (2) liabilities for obtaining money under false pretenses, or for wilful and malicious injuries to person or property, or for alimony, or for maintenance or support of wife or child, or for seduction, or for criminal conversation, (3) those not duly scheduled where no notice to debtor, (4) those created by fraud, embezzlement, misappropriation and defalcation.

If you read that carefully then you will find that a conviction for mortgage fraud basically trumps bankruptcy. So if you call your lender and say, "hey.. screw you.. i'm Buying a new house, bailing on this one and there is nothing you can do about it" then the bank can say, "oh yeah? You lied on your application, we're turning this over to the FBI." The FBI is not going to chase after every applicant but if the bank sends over your application with a photoshopped paystub or a gift letter from your parent dated 10/1/2006 when your parents died in 1979 then a mortgage fraud conviction will mean that previous mortgage will haunt you for life and you may still loose the house in the process.

Originally Posted by Sparky06921

I know someone who is upside down and just got approved for a new home and is in escrow. They qualified for both mortgages but the lender still wanted to see a lease agreement and deposit check for the first house. They could provide that, but people back out of leases all the time. Just because someone provides a lease agreement and then later stops paying on the first, wouldn't it still be tough to prove fraud? You could just say your prospective tenant backed out. Right?

This is pretty easy. The FBI goes to the prospective tenant and starts asking questions in an intimidating way. They might say, "look.. we know you never intended to rent that house.. who are you covering for? Why would you lie? Tell us the truth now and we'll be on our way otherwise you're coming down to our office. Mortgage fraud is a serious crime." Most people, if they did lie, are going to Sing like their life depended on it. In about 10 minutes they'll have a full confession and the mortgage holder is in trouble. Of course if the prospective renter isn't lying then they'll stick to their story, provide a plausible reason for canceling the contract and the FBI will toss your application in the proverbial trash bin 10 minutes later.

----------------

Originally Posted by Sparky06921

Lots of scare tactics out there and I'm just curious as to what would ever draw a Federal look into your mortgage issue.

You are right. The only way they can keep people honest is by scaring them into believing much in the same way organized religion threatens lightning strikes on clear sunny days. How do I know it is all B.S.? I can only assume that out of hundreds of thousands of foreclosures there is at least 2 or 3% who can afford to Buy and Bail. If 70 people/day, 7 days/week are Buying and Bailing and not a single case has made it into front-page news then clearly, if it were a crime, is not being prosecuted.

The strategic foreclosure, or 'buy and bail' | NorthWest Cable News | Consumer

Another homeowner, Ed Gonzalez, says it was desperation, not greed, that prompted him to do his own strategic foreclosure, which is a nicer term for "buy and bail."


Ed says that because he got an ill-advised loan, he was going to lose that first home no matter what. He says he tried negotiating with the lender for relief, with no success.


"I even spoke with the general manager of the lender and he told me the same thing as the associate told me. If you have to do a foreclosure then so be it. It's almost as if they were encouraging me to do it. It was frightening. I couldn't believe it," says Gonzalez.


The practice is not illegal, although some question whether or not it's ethical.

[azhardspot]

Dog...Jakeblary

If I have my wife buy a new home under her own mortgage and title while I' Foreclose my current home that has only my name on both the mortgage and title .... is that still considered buy & bail?

if yes ..why

in this case even after i foreclose .. her credit score is not affected
also she is making payments from her own bank account and is qualified for the mortgage all by herself

so if the underwriter is relying on her credit score and monthly income --> none of those things change after i foreclose..

we live in AZ community property state

thougts?

[dogatemy]

Originally Posted by azhardspot

Dog...Jakeblary

If I have my wife buy a new home under her own mortgage and title while I' Foreclose my current home that has only my name on both the mortgage and title .... is that still considered buy & bail?

if yes ..why

I'm beginning to think we have beat this horse to death. Buy and Bail is just a term used to describe one person buying one house while the same person strategically decides to default on their previous house. This is not a crime so I fail to understand why it matters what you call it?

In any event.. No. It is not Buy & Bail because technically YOU have to buy one house and YOU have default on your previous house. Unless you, and your wife, are the same person then it does not qualify in the strictest sense of the term?