Escalon family finds no shame in 'buy and bail' strategy

Tim and Lisa Nessle put $125,000 down when they bought their small Escalon home in the spring of 2007. The three-bedroom house, where they planned to live out their retirement, cost $325,000. Now it is worth only $140,000, while they owe $196,000 on their mortgage.

They think a strategic default is in their best financial interest.

"I'm already plotting," said Tim Nessle, a retired Stanislaus County sheriff's deputy. "We're considering buying another house and letting this one go. We're looking at houses for $150,000 (that are bigger and nicer than the one we have now)."

That's called a "buy and bail." Homeowners who have done it purchased a second home while their credit was still strong, then defaulted on their original home's mortgage. That freed them from paying their old debt and enabled them to buy a bargain-priced home with a lower monthly payment and more appreciation potential.

Nessle said he knows people have financially benefitted from such a swap, so he is researching

whether he could make one work. But banks have caught onto the tactic, so Nessle said it is harder to do now than before.

Whether he buys and bails or simply defaults and becomes a renter, Nessle said he will not feel guilt or shame.

"It's just a financial decision. You've got to do what you've got to do," Nessle said. "I'm drowning over here, and no one's throwing me a rope. So, I've got to start paddling on my own."

Lenders don't feel guilty about their role in the housing market crash, Nessle said, so he doesn't understand why he should be shamed into not doing what is in his family's financial interest.

"Banks rolled the dice, and they were living the high life (during the housing market boom)," Nessle said. "They made some serious money, and now they're trying to hold on to it."

He wonders why his family should suffer when banks won't share the pain.

"That $125,000 we put down was a hell of a nest egg," Nessle said, "and in the blink of an eye, it was gone."

If his lender would consider splitting the difference between what his home is worth and what he owes on his mortgage, Nessle said he would not default.

"I'd take it in a heartbeat," said Nessle, but his lender won't consider it. "By not working with us, the bank basically gave us permission to default on our loan. Very disappointing."

— J.N. Sbranti