Back in 2009, SBA loan defaults were through the roof at most major SBA lenders. The stock market had taken a huge hit in late 2008, and foreclosures were starting to depress home prices across the country. Once of the places that was hit the hardest was California. Prices were dropping as much as 50%, something most people could have never imagined.
While prices falling through the floor was generally a bad thing, there was a silver lining for those who had SBA debt that needed to be settled. Those who pledged their homes as collateral because they had equity in them were now in situations where their homes had negative equity (ie they owed more than the homes were worth). When negotiating a settlement, banks and the SBA always review the collateral, and if there is equity in pledged real estate, the offer will start there. So after prices plummeted, virtually nobody had equity in their homes. That was great from a negotiating standpoint. Negotiate a settlement today while there is no equity, get the home released, and if/when prices do go back up, the borrower could keep the equity for themselves.
Well, friends, those times seem to have passed. Most calls I get these days (2017) are from people who did nothing back in 2009, the bank never paid any attention, and now the treasury has come calling. The poor borrower has missed their chance. First, the Treasury is pretty much impossible. Second, even if you could settle, the equity in the home has returned. In 2009, there was $0 in equity. Today, there is $200,000 in equity in the home that secures a $150,000 debt. In short, the opportunity to settle has passed.