I understand the explanation to mean that anyone who currently has an overinflated mortgage in a declining market could in theory get some of the loan forgiven.
It looks like it would all come down to a judgement by the bank as to who is likely to default without such debt forgiveness. It also appears it might encourage people to stop making payments in hopes of getting bailed out.
I’m thinking this incentive could make things more difficult for the banks. If I’ve been making payments on time, but am tired of the debt burden, why shouldn’t I stop paying, get a NOD as leverage, and request my “bail out”? It seems this “cure” might cause more NODs and loan writedowns than would otherwise happen.
