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Buy and Bail
What is Buy and Bail? It is a scheme where the owners of a home discover the value of their home has dropped. The outstanding mortgage balance is more than the value of their home. They continue to make the payments on their mortgage as agreed. They then in turn, find a second home at a lower purchase price, apply for a new mortgage with their credit intact and finalize the purchase of the new home.
They then stop making mortgage payments on the first home and allow that property to go into foreclosure. In the process they destroy their credit rating, but they are in a new home, sometimes purchasing a larger and better home or they purchase a home of the same range, but with less debt.
There has been a fair amount of this type of activity. It is being considered a form of mortgage fraud.
A few good articles on the subject: About.com Investor Centric Wall Street Journal
