Totally agree with your point. There will be pain due to the lax lending standards, but many will survive. I also have a friend who got an exotic loan to get into a house a couple of years ago; I don’t think he and his wife will have any trouble meeting the increased payments.
Their incomes are probably double what they were 2 years ago.
However, it is very likely that my friends will lose some money, even if no foreclosure or bankruptcy is on the horizon. If I buy a $700K house, I lose $200K when it drops to $500K, no matter what type of loan I have, or even if I paid cash. For those in strong financial positions (lots of equity or lots of cash) the pain may be bearable, but the amount of money lost is just the same. One could actually argue that those in 100%LTV suicide loans have less to lose than those who have large equity stakes.
