Imagine a borrower purchased a $1 million house. At the reset time he owes $1.1 million. The house is then only worth $500k. What’s that borrower likely to do?
1) Keep on making payments on the $1.1 million loan to live in a $500k house?
2) Walk and let the bank have house?
I think the more expensive the houses, the more likely the borrowers are to walk.
