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.

Bank of America has announced a co-op short sale program, targeted at homeowners who have failed to qualify for mortgage modifications under HAMP or HAFA.

BofA is launching the new program with 2,000 homeowners who have already been pre-screened because they applied for mortgage modifications under HAMP or HAFA. The bank is offering them the short sale as an alternative to foreclosure.

Letters to homeowners asking them to participate in the new short sale program have been sent out. They have 120 days to list their property. BofA says it will assign a short sale specialist to work with homeowners and their real estate agents on each short sale.

Once the home is sold, the homeowner gets a $3,000 relocation fee, and the agent receives a six percent commission on the sale. If the home does not sell, the bank will accept a deed-in-lieu of foreclosure. BofA is also waiving deficiencies.

To learn more about the program, go here.

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.

What is yesterday’s news (literally) may become tomorrow’s big headache for many homeowners who participate in a short sale.

A Feb. 3 article for CNNMoney.com explained how banks and other lenders are now pursuing former homeowners with “deficiency judgments” – asking them to pay the difference between what they owed on their mortgage and what the bank could finally sell the home for at auction.

This is even if the bank approved the short sale.

And get this: the poor homeowner featured in the article who had to declare bankruptcy because she was being chased for $65,000 from her short sale…was a real estate agent.

There are 30 states in which this is legal – fortunately, California is a “non-recourse” state and doesn’t allow deficiency judgments. But Californians still aren’t safe – if you refinanced your original loan (and that’s a lot of us), some or all of it may still be subject to a claim.

So how do you protect yourself? If you’re pursuing a short sale in California, add a savvy real estate attorney to your team (we just happen to know a few of them…).