In an e-mail sent out today to business partners, Indymac warned about and provided general guidance regarding the "buy and bail" phenomenon allegedly sweeping the industry.
The Wall Street Journal brought the problem to light recently that explained how underwater borrowers are purchasing nearby homes at a discount and then not making payments on their existing homes resulting in foreclosure.
While it may seem like a complicated endeavor, the article noted that some borrowers were doing it with relative ease, while others received coaching from real estate agents and mortgage brokers.
Indymac is warning business partners to be "extra vigilant" when their borrowers are looking to purchase owner-occupied homes if they already own existing property.
The e-mail said to be especially careful in hard-hit markets of Arizona, California, Florida, and Nevada, noting that lending to borrowers who are about to bail is much the same as lending to a borrower with a recent foreclosure.
The e-mail noted that "buy and bail" is becoming a significant problem, adding that the FHA, Fannie Mae, and Freddie Mac have already instructed underwriters to proceed with such deals cautiously.
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