I’ll try a bit to…I am way out of my league even trying to answer these questions but I will be in San Jose tomorrow so I am procrastinating at the moment…no warranties on my answers and they will most likely be corrected by those in the know…
Who ultimately holds all the debt? Chinese Bond holders? American Bond holders? Banks? Mortgage Companies? To put it another way what nations and institutions would be most stressed?
– The debt for mortgages are held by whoever currently is servicing that mortgage. Many mortgages are established by a lender or mortgage company and then sold. So when a mortgage is defaulted on, whoever is holding it is boned.
– American or Chinese Bond holders needs to be clarified. If you are referring to people who own 10 or 30 year treasuries, these are NOT mortgages or trust deeds. Treasury notes are bought and sold on the open market and are used to finance federal debt. They are independent of mortgages. (Someone correct me on this as I am at the limits of what tiny tidbits I know about these types of securities)
Now how the holders of these securities are affected by the housing market is TBD.
Now there are lots of other bonds… take muni bonds for instance. Lots of people have those, like my parents. Well remember when the OC went belly up a few years back? Well bond holders for OC municpal projects were S.O.L. I do not know if they were re-imbursed by the state of California or not.
I will defer to waiting hawk on the answer to your second question. From his answer is seems if you default on your primary mortgage then it sounds like the lender cannot go after you. I do not know if you need to go through and declare bankruptcy or not to make sure they stay off your back.
Also I don’t know if that applies to a short sale.
