debt forgivness "en masse" for under-water homes?

[sniglet]

[mike2]

[rose-colored-coolaid]

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[SunTzu]

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[SunTzu]

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[finance]

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[jillayne]

Banks have to walk a fine line when they decide to "forgive" the debt.

We're talking short sales where a lender forgives the difference between the sale price and the payoff.

Well, first of all, markets have dramatically slowed down. By the time an overmortgaged seller finally has a bonafide purchaser, it might be too far into the foreclosure process to make it work. These are complex transactions to put together and the VAST MAJORITY of real estate agents HAVE NO CLUE where to begin when they get one of these listings. (I have taught the Short Sale class to Realtors for about 8 years now.)

For a bank, it is strictly a business decision: The bank must try to mitigate losses. They're not required to try to predict future value of a neighborhood. They must focus on returning a profit to their shareholders.

How would they justify mass debt forgiveness to their shareholders? Answer: They can't. They must try to minimize losses and maximize the dollars they can make on the foreclosure and resale.

Now, do I see exceptions to this theory of no mass debt forgiveness?

Yes.

If a bank has reason to believe that the consumer will sue the bank for any number of reasons (predatory lending on the retail origination side for example,) I as a bank loss mitigation officer would try to make that borrower as happy as possible.

Which is why it is crucial for anyone facing foreclosure or a short sale to get legal counsel immediately. Financially distressed? Get free legal aid through the local Bar Association.

If I were a loss mitigation officer at a bank, and I thought that the BROKER who originated the loan on the retail side had violated the broker-lender contract, I would foreclose and then go after the broker to help share in my losses.

[Siddha]

Thanks for posting this.

[Alan]

Mexico has extreme wealth disparity. I bet you had no idea that Mexico is one of the wealthiest countries in the world. I've heard that in the past ten years, a number of US politicians learned the tricks they play in Mexico and started implementing them here.

One of the schemes is to borrow a bunch of money right before a planned currency devaluation, convert it to USD, wait for the devaluation, convert the USD back to Pesos and pay back the loan for 1/3 of the value.

[Siddha]

[Alan]