Reply #3: This doesn't sound right: [View All]

[eyesroll]

"3. Existing homeowners who have less than 20% equity will now be in a serious financial situation. The value of the house will be less than the outstanding mortgage by as much as 20%. On a $300,000 that means the borrower may have to pay the bank $60,000 immediately to keep the house (much depends on the home-owners current financial situation). If they can not pay the difference, the "

OK, I understand if you're upside down on your house (you owe more than it's worth), it's not a good thing.

But I don't think the bank can call the difference due immediately -- the loan is contingent upon the value of the home at the time of purchase, and whether it goes up or down, that's still what the borrower owes. They still have to make those $x-a-month payments.

This does happen from time to time absent a correction -- if you let your home fall into disrepair or the neighborhood goes to hell, or you're underinsured/uninsured and your garage burns down, lowering the value of your property by thousands of dollars. People do end up owing more than their houses are worth. But I don't think the bank can change the terms of the loan and foreclose.

Yes, if a homeowner tries to sell in this situation, they're screwed.