basic example: you borrow $200 to buy a home for $250. You use the home as collateral. So you got $200. You pay back over the years principal and interest, only care about principal of say $50 so now you owe net $150. the home plummets in value with the market to only worth $75. You walk away from the obligation. The bank sells in foreclosure and only gets $60 and has tons of other costs for this. Net at the end of the day 200 original brw - 50 pd back - 60 bank got funds = $90 of loan forgiveness to you. you also got to live in that home and not pay rent to someone. That's how it's looked at.
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