“I have opined earlier in time that it may not even get to a govt. bailout situation if lenders/servicers modify re-cast terms to avoid blowing borrowers out of the game when their ARM re-casts. There is already evidence that some servicers plan to do just that. Should be interesting to see how it all plays out.”
This is what scares me (and could precipitate a soft-landing).
Basically the banks figure exactly how much they can gouge out of homeowners, per month, and keep them in their homes. Prices would drop slowly, if at all, due to the lack of foreclosures. Rents would likely increase, due to lack of supply, to meet the new bottom.
