From Business Week comes the tale of what happens when a society is consumed by entitlement mentality and the expectation that someone else should foot the bill. How anyone can look at themselves in the mirror after engaging in this kind of unethical behavior is beyond me. As usual — hard-working folks who honor their commitments in good times and bad — will end up paying for this one way or another. Pathetic.
Real estate professionals call it “buy and bail,” acquiring a new house before the buyer’s credit rating is ruined by walking away from the old one because it’s “underwater,” or 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.
The practice, which constitutes fraud if borrowers lie on loan applications, is continuing even after Fannie Mae and Freddie Mac, the biggest U.S. mortgage-finance companies, beefed up standards to prevent it, according to brokers such as Collier and Meg Burns, senior associate director for congressional affairs and communications at the Federal Housing Finance Agency. Whether driven by greed or desperation, the persistency of buy and bail underscores the lingering impact of the worst housing crash since the Great Depression.
