The Trouble With Buy and Bail Schemes
Wednesday July 2, 2008
It seems lots of home buyers who premeditate foreclosure prior to buying another home don't see any problem with the concept of buy and bail.
They can't figure out why it's against the law or what mortgage fraud means. Contrary to what some buy and bail buyers believe, lenders are cracking down. The FBI is presently investigating more than 50,000 cases of mortgage fraud and have made sweeping arrests in the past week.
I can understand why a buyer would want to pursue a buy and bail scenario. I imagine most feel they are pushed up against the wall with no way out. They can't afford to pay their mortgage, their home has lost value, and they don't want to end up renting again. But breaking the law isn't really the answer . . . read more about Buy and Bail.
More Articles by Elizabeth Weintraub:
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Comments
The buy and bail issue may continue to grow with the rise in job loss and people looking to secure a home. Its a shame people have to resort to it. If most lenders are not really interested in helping their customers as much as they should. There are loss mitigation firms that work for the customer such as foreclosurelight loss mitigation LLC. Before people look to do something as unethical as buy and bail they should really look into getting help to save their home the right way, working with their lender with someone knowledgable and on their side.
http://www.foreclosurelight.com
The thing is most people can work out a new arrangement with a lender by themselves. They do not need to pay an outside company to do it for them. Moreover, there are free services available that will help a homeowner negotiate.
Yes this is true. People can do it themselves. However, most of them soon find the paperwork confusing or they dont have the time to complete it accuratly. I have seen that in a lot of cases (not all) the lender would agree to a workout solution with the customer that was not always best for the customer. Why this happens is hard to say. I think it is due to the lenders not being properly staffed to handle all the needs of their customers. Working with a company like Foreclosurelight Loss mitigation LLC will ensure the homeowner that someone is on their side to get them the best modification not just any modification.
Just ran into the “consequense” side of this rule. I am a homeowner with rental properties. SInce I have a steady income that has significantly increased over the past two years, I was looking to move up in houses, adding my current residence to the inventory of already stable rental houses I have. I can easily rent my current 5 bedroom house for what I pay on it, and then some…but in trying to qualify for a new house, I have my current mortgage (But no rental income from it) counted against my debt to income ratio. My track record as a landlord, 9 or 10 years of on-time mortgage payments (Nothing ever paid late- ever) and high credit score do nothing to mitigate this. A sad case of people doing the wrong thing affecting those that do the right thing.
My thinking;
Why is it not ethical to buy and bail, but if you contact your lender and they tell you that you have to be late on your payment in order for them to consider modification, etc. Also one of customer service reps told me to wait 2 months and then be late, why I don’t know, but I’m certain something is happening in 2 month or 3 months. So you’ve got the case like mine, we love our house we can’t afford it because I am on permanent disability, hopefully not permanent but atleast another 3 years, I was a Loan Officer for 25 years, I lost my clientelle, my business that I had worked so hard to get through the years because of my condition and I average 100,000 + a year, and I’m not making 24,000 a year on disability. In most scenarios with our issues they would not be able to afford it; my husband and I are struggling to make the payment, but we take pride in our credit. So in the mean time, the people that dont live within their means are getting the benefits of loan modification, lowering their principle, payment and interest rate…does this make any since, we are being penalized for living within our means and will have to wait for the market to turn and most like a couple years more than the homeowners that were late on their payment; they will be receiving their equity and be able to sell way before the rest of us…I’m very upset about this whole situation. My husband and I want to purchase a home that will take our payments down to 1500, we can’t work with the bank unless we are late..ridiculous! I am moving forth with purchasing another home, but our INTENT, is to rent it out to my brother and friend, which my brother just lost his home and is going through a divorce. My problem with this is we won’t be able to make the payments if they were to move out and we couldn’t find another renter. Yes on paper we qualify for 2 homes which fnma requires. We have never been this tight on bills, because we give up entertainment to make sure we make ends meet. I am very frustrated but to me this isn’t fraud and we are renting it out to my brother and friend. Honestly though we won’t be able to make that payment if we don’t have a renter. I’m just so stressed with our situation and want to make sure we abide the law even though very unfair to my husband and I and others who live beneath their means. This situation has caused a lot of friction between my husband and I because of the whole situation.
I know that I wouldn’t have any problems if the FBI came and investigated, but I would think he wouldn’t have an interest in our situation, plus I am renting the house out, but we have already discussed it and if my brother does move out we will let the house go. We have lost alot of money on our 401k and stocks, which I know the majority have, this is added stress that we don’t deserve as homeowners.
It would be great if I could hear from someone else in the same situation or someone to guide us. We are in California and the lender can not come after us for the difference if we were to let the property go, but this law is only in effect till 2011 and if my brother leaves after that we are doomed.
Alot of stress leaving our home even though we would be moving into another home that we could afford.
Thanks for your time,
Cami
Hi Cami: What do you mean the law expires in 2011 for a deficiency in California? As long as the lender forecloses under a trustee’s sale and your loans are purchase money, there is never any deficiency. You should check with a lawyer to get clarification.