Underwater Homeowners Try 'Buy and Bail'

While it's a type of mortgage fraud, more and more people are turning to the strategy of buying a new house at a lower price and then walking away from their underwater home. Now that 14 million homeowners are underwater, with a projection that their number will grow to 20 million by the end of 2011, desperation has set in.

People stuck in underwater homes, in which they owe $100,000 or more than the current market value, are tempted to just buy a house in the same neighborhood for less and then walk away from their first home. This is known as "buy and bail." AW Pickel, President and CEO of LeaderOne Financial Corp., says lenders are watching out for this all the time.

Even though the Federal Housing Administraton and Fannie Mae have put out guidance to prevent buy-and-bail, people are finding their way around these rules.