I saw others criticize you (PS) on this high assumption of defaults of ARMs (e.g. 95%). Am I correct, that it doesn’t depend only on if they can meet the payment shock, but also how their house is valued. So for the ones that bought last, the amount might be huge by what they will be under water. So even if they can barely scratch together the payments, e.g. by taking more debt elsewhere, if their condo has a market value of $350,000 and they have a $700,000 loan, they might just call it quits. How does this depend on the type of loan? In which case can they walk away (and just get bad credit), or when are they still liable for paying back part of it? (Sorry to ask such a basic question that probably everyone on this forum knows.)
