Wouldn’t lower rates would reduce the number of bankrupcies since it would improve the balance sheets of many borrowers. Sure, the overextended 0% down option arm people are screwed, but reduced rates would aid the balance sheet of many potential bankrupcy cases than increased rates.
I guess it depends on the timing and extent of potential rate drops relative to the ARM re-set time bombs.
My guess: rates drops would dampen the severity and lengthen the time for prices to fall.
