Low property valuations and steep sales discounts reduce the proceeds from liquidated loans by almost a third, according to Moody’s Investors Service. As home prices drop, equity erosion drives most of the losses incurred on defaulted loans, but Moody’s says in today’s environment that’s not the whole story. The agency’s analysis of 46,000 loans liquidated since 2007 found that on average, a foreclosed property will be valued about 18 percent lower than average home prices, and will be subject to an additional sales discount of about 15 percent.
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