To Bail or Not to Bail?

In San Diego and probably most of the U.S., agents are getting calls day in and day out from people that are planning to bail on their home.

Apparently the new term is “buy and bail,” which means acquiring a new house before the credit is ruined and you walk away from it.  You escape payments on a home whose value is low and get a nice new shiny home for a cheap price.

Who is the most likely type of homeowner to walk away from their home? 

Guess what, the homeowners with the best credit scores especially with jumbo loans that exceed the max set for mortgages above 729K in California will most likely bail.

The whole buy and bail system is done most by people with big enough paychecks and low enough debt to qualify for two homes.  What they do is they guarantee that they have somewhere to live before they go into foreclosure.

Fannie Mae and Freddie are obviously doing as much as possible to stop this.  They are now requiring reserves equal to six months of loan payments for both homes and that is stopping most applicants.

So now we have, “what comes first, the chicken or the egg?”  How will this affect the market?  Does making this more difficult and making loans harder to get help or hurt us?

If the recourse for this is strict enough, will it help our market if people stop?

Less people would walk away, so fewer homes on the market, however there would possibly be less homes available.

In about two thirds of U.S. states, including Florida, lenders can go after a homeowner after foreclosure with a deficientcy judgment.  California doesn’t have this unless the house was a primary residence.

Is this good or bad?

It will be interesting to see what happens with the housing market and the programs in place to help aid it.

SEE SAN DIEGO REAL ESTATE HERE!