Why these banks make loans to people with so little skin in the game is beyond me. The banks take almost all the risk (if the market declines) and the buyer gets all the reward (if market appreciates). They made a bad business decision in loaning the money in the first place, plain and simple.

Think of it this way: by walking, your friend is effectively spending the 5% (~30k? can’t remember the purchase price) down to receive 100k debt reduction. Sounds like a good deal to me. He’d be crazy not to walk.