Buy and bail – where a homeowner buys a new house before his credit is trashed by walking away from the old one – is on the rise, according to a recent Bloomberg report.

According to the article, those most likely to “buy and bail” have a large income and low debt, enabling them to qualify for a mortgage – now at historic lows – on another home.  Once they purchase that home, they then walk away from the old home that likely carries a much larger mortgage payment at a much higher interest rate on a property that is worth considerably less than they paid for it.

A Morgan Stanley report noted that those most likely to walk away are debtors with the best credit scores and jumbo loans that exceed the Fannie and Freddie cap limits for mortgages.  They have typically lost more than $100,000 in property value.

Both GSEs put protections in place two years ago to thwart buy and bailers, but a Freddie Mac spokesman quoted in the Bloomberg piece said, “it still seems to be going on.”

Of course, if buy and bailers use false information to qualify for a loan on that next house, that’s called fraud.  And the FBI is working with local housing agencies to conduct investigations.

An analyst from Lender Processing Services, a default services analytics group, is predicting that foreclosure and REO issues could continue to plague the housing market recovery until late 2013.

During the LPS annual conference in Denver last week, LPS Applied Analytics managing director Kyle Lundstedt said that well-intended programs designed to keep borrowers in their homes were having unintended consequences, and that those in the default industry need to be prepared for troubled loan inventory to continue to rise.

“If current trends persist, it will take about 12 months before foreclosure proceedings are initiated,” once borrowers become delinquent, Lundstedt said in an REO Insider report. “It takes a heck of a long time to get into foreclosure at this point. When you are in foreclosure, it doesn’t get much better. Today, if you entered foreclosure, it would be 16 months before you got out. How many people think that is a good thing? It’s tragic.”

The Center for Responsible Lending, a nonprofit research center and borrower advocacy group, reports that Latinos account for almost half of the foreclosures in California.

The CRL says that Latino borrowers make up 48.2 percent of the over 700,000 California homes currently in the foreclosure process, based on their analysis of data from ForeclosureRadar and Catalist.  According to the U.S. Census Bureau, Latinos make up 37 percent of California’s total population.

White/Non-Hispanic homeowners accounted for 34.6 percent of foreclosures in California, and African-Americans were 7.6 percent.  Asians accounted for only 6.4 percent of California foreclosures.

According to a REO Insider article, lenders and servicers have taken notice of this trend, and some are targeting minority-owned brokerages for their REO listings.  In addition, a Fannie Mae executive said that hiring real estate agents and brokerages that serve minority communities is one of its key strategies.

A new University of Texas-Virginia Tech study says that while foreclosures may “destabilize and disorganize” communities, they do not directly affect the neighborhood crime rate.

Researchers said that instead of affecting crime, foreclosures are — like crime — symptomatic of a community’s lack of political clout, poverty and segregation.

The study used data on foreclosures and crime in Chicago during an eight-year period, from 2000 to 2008.  During that time, foreclosures tripled in the study area.  Researchers examined the consequences of the rising foreclosure rates, and the effects on crime and the structure of the study area.

Many housing experts had thought that foreclosures increased property crime since abandoned homes were easy targets for vandalism and burglary.  David Kirk, assistant professor in the UT Department of Sociology and lead researcher on the study, said, “We suggest that our results provide a more informed depiction of the complex relationship between community conditions, foreclosures and crime in Chicago.  We were able to statistically adjust for confounding influences such as segregation, the political hierarchy of communities and other unobserved factors predictive of both foreclosures and crime.”

ForeclosureRadar reports that California foreclosure activity was “mixed” in July, with foreclosure filings and cancellations dropping from June and foreclosure sales rising.

California foreclosures moving to REO status were up 13.46 percent in July from the previous month, but down over 18 percent from July of 2009.  Notice of default filings were down 4.8 percent from June, and down 47 percent from July of 2009.

ForeclosureRadar CEO Sean O’Toole said that despite a “tsunami of mortgage delinquencies, we continue to see no signs of a foreclosure wave.”  He said that government and lender intervention programs are continuing to delay foreclosures.

The report also said that in July, it took an average of 226 days to foreclose in California, down slightly from a 2010 peak of 239 days in April.

To read ForeclosureRadar’s July 2010 California Foreclosure Report, go here.

July foreclosure data from RealtyTrac shows that REO levels in July were at the second highest level since the company started reporting in April of 2005.

The highest point ever recorded by the company was just two months ago, in May, when there were 93,777 properties that went back to banks as REO.  In July, that number was only one percent less, at 92,858.

However, RealtyTrac said that foreclosure filings categorized as a notice of default through REO dropped almost 10 percent in July from the same month one year ago.  It also dropped in June, making July the second consecutive month for yearly declines.

In July, Nevada continued to hold the #1 position as the state with the highest foreclosure rate at one in every 82 houses.  Arizona was second, with one in every 167 houses and California was fourth, where one in every 200 houses received a foreclosure filing in July.

California Attorney General Jerry Brown has opened an investigation to protect tenants of properties that have been foreclosed on – a group he calls “the forgotten victims” of the housing market collapse.

Brown said that it is estimated more than one-third of all California foreclosures are rental units and that over 200,000 tenants have been displaced.

In a letter to banks, loan servicers, investors and law firms across the state, AG Brown said that his office has been petitioned to take action by more than 20 housing rights and public interest groups that cite illegal conduct and tenant harassment by banks, real estate agents and attorneys trying to fast-track evictions so properties can be sold.

Brown has asked the letter recipients to provide information on their foreclosure policies and procedures by July 19; he specifically requested details on how they “promote and preserve tenancies after foreclosure.”

Tenant advocacy groups say that tenant harassment and illegal evictions continue across California, even though the 2009 Protecting Tenants at Foreclosure Act specifically prohibits such actions.

Under the PTFA, tenants with a lease have the right to remain in their homes for the duration of the lease; those tenants without a lease have up to 90 days to vacate.

Deutsche Bank has issued a report ranking U.S. mortgage servicers on the speed of completing short sales transactions.

For prime lenders, the winner is GMAC, with an average transaction time of six months.  CitiMortgage was in second place at 7.5 months.

Countrywide, now owned by BofA, sucks wind in the prime category, coming in last with an average transaction time of 13 months.

The report ranked mortgage servicers in four categories: Prime, Subprime, Option-ARM and Alt-A.  Of all the servicers in every category, Equicredit had the lowest possible score, taking an average of 29 months to complete a short sale.

Read the article at REOInsider.

A recent New York Times article reported succinctly on the growing trend of homeowners who are “underwater” on their mortgages simply packing it in and walking away.   Called “a situation without precedent in the modern era,” abandoned homes are becoming more prevalent as “people’s emotional attachment to their property is melting into thin air.”

An Arizona mortgage broker admitted that he has advised many of his clients to walk away.  He even defaulted on a rental property he owns.

By June, the number of homeowners who owe more than their home is worth is projected to be over 5 million – which is approximately 10 percent of all American mortgage holders.

And with some big commercial property owners walking away from their financial obligations –like Tishman Speyer BlackRock, one of the country’s largest commercial property owners, that sent their $5.3 billion investment in 11,000 apartments in New York back to their bankers – homeowners are often left thinking, “why not?”

Pile on the bank bailout outrage and headlines about the reinstatement of big bonuses for bankers, and the “why not?” can quickly turn into a “hell yes”.

So are “strategic defaults” a good thing for a borrower? In many cases – you’re darn right they are.  So why so few of them?  Read more here.

Many banks suspended their foreclosure activities in December for the holidays (can’t have Tiny Tim in the street at Christmas….let’s wait until January!).  So it wasn’t unexpected to see the December foreclosure rate decline.

However, according to ForeclosureRadar.com:

Foreclosure activity dropped dramatically in December, especially when looked at on a daily average basis. For example while Notices of Default dropped 17.5 percent in aggregate, they actually dropped 32.5 percent on a daily average basis due to the fact that December had 22 days on which documents were recorded, versus 18 in November.

“The dramatic drop in foreclosure activity may have been a Christmas gift to homeowners,” says Sean O’Toole, Founder and CEO of ForeclosureRadar.com, “however, given rising mortgage delinquencies it is becoming increasingly clear that foreclosure activity no longer fully represents market realities”.

Unlike November where we saw nearly flat foreclosure filings on a daily average basis, with declines being due to the holiday shortened month, the decline in December foreclosure filings is actually understated due to the increased number of recording days. On a daily average basis, Notice of Default filings dropped a dramatic 32.5 percent from November and Notice of Trustee Sale filings dropped 23.0 percent. We have not seen a similar December drop in recent years, so this is not simply a regular seasonal decline.

Another tiny pinpoint of light in the foreclosure debacle?  We won’t know until we get more number from the first few months of 2010.

But maybe…just maybe…we won’t get Scrooged quite as hard this year as last.