Blogging About Loans: Trying to Stop "Buy and Bails"!

An office of elite mortgage lending professionals with a common interest and goal focused on providing customer service that exceeds expectation. Thereby building our business from repeat and referral opportunities. Ruth Vogt. LMB 100023827. NMLS 257576. Regulated by the Division of Real Estate. Fairway Independent Mortgage is an Equal Housing Opportunity.

Trying to Stop "Buy and Bails"!

One of the most recent scams that has evolved due a slow housing market is being referred to as the "Buy and Bail". This is where people buy one home with the intention all along of defaulting on their current residence!

Until now, homeowners were able to provide a lease agreement to offset their current mortgage payment and help them qualify for a new home without much scrutiny. Earlier this year, conventional guidelines addressed changes stipulating there must be 30% equity in the home to allow the new rental income to be used to offset the mortgage payment. But now a recent update from has also come from FHA! Going forward the circumstances in which an underwriter may include the income from the rental agreement for the current residence are as follows:

1. The borrower must be relocating to a new job location, and the new home is outside reasonable commuting distance from the current residence (UW's discretion).

  • The borrower must provide a fully executed lease with at least a 1-year term from the closing date of their new mortgage.
  • The borrower must also document receipt of the security deposit and/or first month's rent.

2. OR, if the current residence has an LTV of 75% or less.

    The value of current residence can be proved with the following:.

  • Appraisal no more than 6 months old, or
  • Original HUD-1 compared to current unpaid mortgage balance

This is effective immediately and may be a temporary change giving FHA time to further analyze this situation to determine whether permanent measures may need to be taken.

These changes apply solely to a principal residence being vacated in favor of another principal residence.  It is not applicable to existing rental properties disclosed on the loan application and confirmed by tax returns.

Opinions expressed here are the sole responsibility of the author, and do not necessarily reflect the view of Fairway Independent Mortgage.

Ruth Vogt Colorado Mortgage Lender Ruth Vogt, Sales Manager

 #LMB100023827, NMLSR# 257576

 Equal Housing Opportunity. 

 Regulated by the Division of Real Estate.  303-881-7849.


Twitter Icon 


by Twitter Buttons


Comment balloon 1 commentRuth Vogt • September 25 2008 06:50PM


Maybe a change that should have happened years ago. 

Posted by Tammy Anderson, Owens, Broker/Owner ("The Gateway Home Team" of RE/MAX Alliance) over 11 years ago