Bail, Bail, Bail

An article from the WSJ shows us one of the morphing tentacles from the housing bust, the "buy and bail".

"In markets hit hardest by falling home prices and rising foreclosures, lenders and brokers are discovering a new phenomenon: the "buy and bail," in which borrowers with good credit buy a new home -- often at a much lower price -- then bail out of the "upside down" mortgage on their first home.

'Homeowners are able to pull off this gambit -- which some lenders and real-estate agents call mortgage fraud -- by taking advantage of mortgage-lending practices that allow them to buy a new primary residence before their existing residence has been sold. And with the lending industry in disarray as it tries to restructure millions of mortgages, some boast they are able to pull off the strategy with ease."

It is somewhat understandable that many who bought at the top of the market feel slighted when they see the value of their property drop up to 50%. Housing values rose so quickly, and so high, it seems as if some of the professionals should have been screaming in 2005 and 2006 to be careful, a bubble was being created that could pop.

Instead, the professionals are actually clowns. At the top of the bubble they said "Buy, Buy. Buy" because property values never go down. Then, these professionals/clowns offered adjustable rate loans with very low initial rates. These same actors, that were no small part of the run-up in prices, are now doing this:

"In some cases, homeowners are coached through the buy-and-bail process by real-estate agents and brokers who see nothing wrong with it. Some blame the phenomenon in part on lenders' unwillingness to cut deals or restructure loans made when home prices were inflated. "It's just a business decision," says Linda Caoili, a Sacramento real-estate agent who is working with Ms. Augustine and others who are considering walking away from their mortgages. "If you're upside-down $250,000, why would you keep it? It just doesn't make sense."

This will be a part of the larger problem of people just walking away from the insurmountable debt. A lot of folks will simply just rent, and have already done so. The idea that not that many people will 'walk away' is fallacy. They will walk by the thousands, maybe tens of thousands.

How is it the same characters who put people into houses that are now underwater, get to again sell that house, either though REO, short sale or traditional sale? They call themselves professionals. 100 years ago they were selling cure-all tonics with Laudanum.