Although net income dipped a bit, operating profit (a better reflection of its underlying business) rose by 17%, boosted by robust loan growth in a booming economy.

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Similarly, if a property is sold at foreclosure or in a short sale and the underlying mortgage is recourse (meaning the borrower has personal responsibility for any excess loan deficiency remaining after the sale), then to the extent the remaining deficiency is forgiven, the borrower will again recognize COD income.

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The borrowers could be hedge funds, who either are trying to short a stock or scrambling to cover a stock loan that has been called in, or they could be investment houses that need an underlying instrument for a derivatives contract.

FORBES: Shortchanged