Yesterday's post  was about using a Reverse Mortgage for foreclosure rescue and I received a few questions about how that works if the borrower has little or no equity in the property.

The answer is that many lenders will take a short payoff now. Some still won't, and I posted yesterday about how mad that makes me, but many will. If you are asking why they will take less than they are owed, even if it is less than the appraised value, the answer is that they have written down the value of the loan on their books already (Remember the 100 Billion in writedowns last year?) and they will actually sjow a profit if they take a percentage of the loan now or they have sold the loan at a tremendous discount (between 30 and 50 cents on the dollar) to a new lender that is very eager to make a quick buck.

Pretty much every non-performing loan falls into one of these two categories (or both) and many lenders will take a huge cut to get paid now as opposed to waiting and taking the risk that 1) values will drop a lot more 2) they will have to wait years for the foreclosure process to conclude and 3) they will end up having some crazy judge or legislation that will hold them up even longer than expected.