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Brazilton KS | The simple fact of the matter is that if you (as a lender) have more loaned on the collateral then what you are going to get out of it by selling it, you are in a bit of a pickle. You may well be able to write down the principle some and still leave it higher then what you will receive from liquidation. Similarly, if you have an interest rate locked in which is much above the current market, and the note is in danger of default, and you can lower the interest rate to something closer to market and prevent the default, then the smart lender will probably do what it takes to keep the note producing and out of liquidation. Lenders have a vested interest in keeping their borrowers from going bankrupt...that interest can become quite significant when the lender has gotten himself into a deal which is unrecoverable otherwise. Some seem to like to get all emotional about this sort of thing, but it's pretty much simple mathematics. The lender does not get any reward for 'sticking it to him' when there are other options. His job is to do his best to recover his capital through whatever means he can come up with.
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