Everyone telling you it's "pennies on the dollar" are missing your point. Someone so delinquent on their debt that the bank is about to foreclose probably doesn't even have a penny, much less pennies.
This trick may work if you have a relative who has money and is willing to bail you out. Another person this might work for is someone who has protected assets that the bank doesn't know about. Yet another option could be if the house was bought under a corporation/LLC that has gone bankrupt but the owner of the company still has plenty of cash.
Here’s one example. In 2012 my home was worth much less than the mortgage. I live in a no recourse state and strategically defaulted. I paid cash for a condo. I didn’t default because I couldn’t pay, I defaulted because it didn’t make economic sense to keep paying.
I’ve never cared about my credit score. I think for a lot of people they obsess too much about it. In my case the score went from 800 to 750. At least according to my credit card. If you are able to pay bills on time and otherwise be responsible credit score doesn’t need to be a focus of concern.
Depending on how delinquent it is, Debt can sell for pennies on the dollar. The irony, of course, is the more delinquent you are, the less your debt is worth. Therefore, those who show the least attention to repaying their debt, are the ones who get the best deal on settling.
You just have to deal with Debt Collector harassing you for 2-3 years, and take a pretty big hit to your credit, and you can often settle debt for nothing more than the original principal loaned.
Of course, good luck trying to borrow money for the next 7-8 years...
Most people are not willing/able to get their debt delinquent enough (ability to pay is a big barrier for most) to get there. But almost everyone, if they are willing to put up with the hassle of a debt collector and a credit-history black mark, can negotiate for the original principal.
Debt collector harassment can be pretty efficiently dealt with. Send them a certified letter asserting your right to only be contacted by mail. Sue them for FDCPA violations if they do anything else afterwards.
You’re assuming that people who are behind on their home payments don’t have the money to make those payments.
In the 2008 mortgage crisis, a lot of speculators just walked away from underwater mortgages, not because they couldn’t pay, but because it made more financial sense for them to give up the asset in return for being released from the loan.
But your debt doesn't go delinquent unless you're not making regular payments, which would imply you don't even have a percent or two of your total debt, let alone 10-30% of it.
