Don’t feel too bad for the borrowers. Everyone who put 0% down has a put option on their home. They only lose 1/3 of the real loss– in the tax on forgiveness of indebtedness income.

At some point, borrowers who are underwater are going to realize that forgiveness of indebtedness income is still income.

What truly amazes me is how legions of penny-ante frauds were able to dupe some of the brightest people on Wall Street…