More Underwater Homeowners Combine "Strategic Default" With "Straw Buyer" Purchasing As "Technique" To Keep From Losing Homes?

On Long Island, New York, Newsday reports:

• More Long Islanders faced with mortgages that are more than their homes' worth are turning to an illegal tactic. They intentionally default and convince lenders to take less than owed in a "short sale" of the house, then covertly arrange for someone they trust to buy the home back for them at today's lower prices, say attorneys, lenders, real estate agents and federal officials.

• Or they wait for foreclosure, then give money to relatives or friends to buy new homes on their behalf. It's hard to pull off, hard to catch and risky, but waning home prices have made the combination of "strategic default" and straw purchase tempting.

***

• At least one Long Island lender and several agents say they have noticed an uptick in default-straw-purchase attempts but don't think it's widespread. Because it's illegal, participants don't come forward to talk.(1)

For more, see LI home borrowers turning to illegal default schemes (More Long Islanders faced with mortgages that are more than their homes' worth are turning to an illegal tactic).

(1) An Atlanta man who tried to combine straw buyer purchases with short sales to reduce the amounts owed on properties he already owned (he allegedly used stolen identities, created fictitious straw buyers, and negotiated phony short sale deals for properties in an effort to defraud FDIC of millions of dollars he owed on mortgages) recently got 39 months in prison after copping a guilty plea. See Atlanta Man Sentenced to Prison for Fraud Related to Failed Omni National Bank (Defendant Used Stolen Identities for Short Sale “Buyers” When He Sought Forgiveness of $2.2 Million in Loans).