I’m thinking this may just be cash management by lenders facing liquidity problems. If the loan is one their books, foreclosing means 6 months or so of no payment followed by a cash inflow upon sale of the house (complicated by lower assets on their books, but that’s more of an accounting issue). In the end, it’s more cash than is probably available now based on what they could sell the loans for in the secondary market, but their liquidity problems are short and not long term.
I’m starting to think those folks who have been saying these guys are all going bk are right. I can’t imagine a lot of economic logic in doing this, but I can imagine a lot of accounting shenanigens/trying to get better treatment when you go bk.
I’d be interested to hear the insights of others who are more knowledgeable about the industry.
