Bailing Home Mortgage To Purchase New Home Mortgage Guidelines

Bailing Home Mortgage To Purchase New Home Mortgage Guidelines

This BLOG On Bailing Home Mortgage To Purchase New Home Mortgage Guidelines Was UPDATED On February 2nd, 2019

The best way to explain bailing home mortgage is by a case study example.

  • Say homeowners owns a home that is underwater
  • Underwater in mortgage terms means that mortgage is worth more than the value of home
  • Let’s say that homeowner does not want to keep current home that is underwater
  • The homeowner is thinking of the following:
    • foreclosing
    • deed in lieu
    • short sale
  • However, the homeowner does not want to wait three or more years to purchase a new home
  • So what homeowner does is purchase a new home and tell mortgage lender that they intend on moving to new home purchase and rent out existing home that is underwater
  • Once they close and move in to new home, the homeowner then bails on the exiting home
  • The homeowner then lets it go into foreclosure
  • This is a classic example of bailing home mortgage
  • Bailing can be a practice of mortgage fraud
  • Bailing is not always illegal

Justifying Bailing Home Mortgage

Many homeowners justify bailing home mortgage because of the economy.

  • They feel that they are victims of the real estate market and credit collapse of 2008
  • They often realize that foreclosure and bankruptcy rates soared and their homes plummeting in value justifies them bailing home mortgage
  • Extenuating circumstances such as having a loss of job, medical issues, and loss of business does justify bailing on upside mortgage only if homeowners can no longer afford it
  • However, if home is upside down where the market value of home is lower than mortgage balance and homeowners cannot sell home since they have no equity, bailing home mortgage is allowed and is not considered mortgage fraud
  • Homeowners should contact their current lenders and see if they can do the following:
    • Loan modification
    • Deed in lieu of foreclosure
    • Short Sale
    • Foreclosure

Refinancing And Bailing Home Mortgage

Another common practice of bailing is when a homeowner refinances their home out of their name into the name of their spouse on a home that is underwater.

  • The Home Affordable Refinance Program, also known as a HARP loan, is a government loan program
  • HARP enables a homeowner who owns a home that the market value is lower than the balance of their mortgage loan
  • This program will allow a homeowner that is underwater with their current mortgage loan refinance their mortgage loan
  • But the homeowner will most likely be stuck with the home for many years ahead until market value goes back up
  • By refinancing their current mortgage loan just under one spouse’s name and not the other spouse
  • It will enable the spouse not on the loan to qualify for a mortgage loan if the underwater mortgaged home loan goes into foreclosure without having a waiting period
  • This is a classic example of bailing
  • Bailing can be considered mortgage fraud

Home Buyers who need to qualify for mortgage with a national direct lender with no mortgage overlays can contact us at The Gustan Cho Team at Loan Cabin at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com. We are available 7 days a week, evenings, weekends, and holidays.

By Gustan Cho

www.gustancho.com

Comments are closed.

CALL NOW