The aren't excused from the value of the debt. They are returning the collateral, which closes out the debt.
The whole price of the loan (interest rate, points, etc...) was based upon the home being the only recoverable asset in the case of default.
This is why most loans with less than 20% equity have to pay primary mortgage insurance. If your house declines in value, you probably have an agreement that PMI kicks it. The lender being the beneficiary if the PMI has to pay off.
Theoretically this both protects the borrower from predatory practices and encourages the lender to make quality loans.
The whole price of the loan (interest rate, points, etc...) was based upon the home being the only recoverable asset in the case of default.
This is why most loans with less than 20% equity have to pay primary mortgage insurance. If your house declines in value, you probably have an agreement that PMI kicks it. The lender being the beneficiary if the PMI has to pay off.
Theoretically this both protects the borrower from predatory practices and encourages the lender to make quality loans.