Dear Edith: I will try to make this short. I bought my condo in 2006. My mortgage rate becomes adjustable in 2011. I am upside down $85,000, originally bought for $435,000, worth $350,000 now. I have no problem with the payments now, but I fear when they adjust it will be too much.
I already applied for a loan modification to a fixed rate and was denied through my lender. I can't come up with the difference for a refinance. I have heard of the buy and bail idea. Morality plays a big role, but my future financial situation plays a bigger one. Any advice? -- M.Y.A.
Answer: "Buy and bail" is a practice some homeowners have used to get out of a fix when prices have dropped and they owe much more than their home is worth.
If they just walk away, their credit will be trashed and they won't be able to buy another home. So, they tell a bank they'll rent out the old house, and to prove it, they produce a fake lease. This "rental income" helps them qualify for a mortgage on a new home. They move, then stop payments on the old house and let it go into foreclosure. By the time their credit is ruined, they're all set with a mortgage on the new house.
Buy-and-bail isn't just immoral. It doesn't just trash your credit. More to the point, it's illegal. Presenting a false document to the lender constitutes mortgage fraud. Lying to a federally-chartered lending institution is not simply a misdemeanor, it's also a felony -- and the FBI is investigating more than 50,000 cases.
Since you ask my advice, I'll suggest you forget the whole idea. You're better off than many homeowners who really must move. Just hang in there. If you're lucky, interest rates will still be at their present lows when yours adjusts in 2011.
EX WANTS OUT
Dear Edith: My question is my ex-husband and I divorced seven years ago. He signed over the house and the title is in my name. Both our names are still on the mortgage and my payments are all current. He keeps pressuring and threatening me to refinance. I'm not financially able to do that and do not want to sell. Can he make me? -- e-mail
Answer: It's understandable that your ex wants to free himself of liability for that old mortgage. It’s still on his credit record as his debt. But if you're the only owner, he can't force you to refinance or sell.
There may be a way out. If you can prove (cancelled checks?) that you've been making the monthly payments on your own, sometimes the lender will take your ex's name off the loan and release him of liability. It would only be right, of course, for him to pay whatever document fees might be involved.