Department of Wha--? Redux

A couple of days ago I complained that Felix Salmon had rocks in his head on the matter of debtors buying back their own homes at distressed prices from mortgagees. From the trenches, my friend Mary weighs in to tell me that I'm the rocky one:

I disagree with your take on Thornburg Borrowers' Unit ("TBU"), and here's why. ... [W]ouldn't that have the effect of causing sophisticated [borrowers] to go into default on their loans with the purpose of purchasing them at a steep discount?

My understanding is that after the real estate bubble began to collapse, but before the home mortgage lending market collapsed, borrowers with underwater homes were buying new homes at 60% or so of the price of the existing home, while they still had good credit, then walking away from underwater home. Now that home mortgage lending begins to revive, we may see more of that. So TBU doesn't want to make that easier. Borrowers] could buy the note at a discount and end up owning the residence at 40 - 60% of prior debt without the hassle of moving, etc.

Comment: Ooh, cool. I hadn't heard it, but I'll bet she is right that some borrowers succeeded in buying the new home while their credit was still good, and then dumping the old overpriced one back on the lender. I wonder how many. Still, I go bollywackers when I hear a banker (of all people) saying that somebody "should" do something that is not in the contract. But people dump out-of-the-money options all the time. Banks have been telling us for years (without, I grant, a shred of evidence) that (California) purchase-money home loans are made more expensive by the presence of the (statute-mandated) anti-deficiency rule; if I take them at their word, I must assume they have already priced some such risk. I can't believe for a moment that the bank wouldn't take advantage of this kind of opportunity if offered. Why should they be surprised if their cusotmers behave as they do?

Anyway, I never meant to argue that Thornburg was "misbehaving" by not offering the option--only that I thought they were acting against their own interest. Still, I learn something from Mary every time I have the good sense to keep my ears open--so, thanks again.