When banks foreclose on a house, do they take an entire write-off for the value of the house? Someone said that there was legislation that made them take off the entire write-off. Do you know what the legislation is?
When a bank forecloses on a property, they make a bid along with other interested parties. The bids are based on the property's appraisal and market conditions. This establishes the value of the property for the new owner and that amount is deducted from the debt owed. Say a home has a high bid of $75,000 and there is $100,000 owed. The balance due is now $25,000. That is the amount that would be written off by the bank.
We are not aware of regulatory changes that would require an entire write-off. If the property has value, the bank must still show that. Banks would resist having to use all their reserves writing off balances for which there is an asset with value as well. This wouldn't be to their advantage.
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When a bank forecloses on a property, they make a bid along with other interested parties. The bids are based on the property's appraisal and market conditions. This establishes the value of the property for the new owner and that amount is deducted from the debt owed. Say a home has a high bid of $75,000 and there is $100,000 owed. The balance due is now $25,000. That is the amount that would be written off by the bank. 