“Why are you expecting any type of bail-out? Talk about magical thinking: Its okay to take risks, because the gvt will bail us out. Good luck on that.”
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“Luck” and “magic” have nothing to do with it.
It’s probably not even going to get to the point of a govt bailout. Again, the threshold question is why in the world would the purchasers and servicers of a loan want to own a property that is upside down? It’s a loser for them. They lose at least 6 months of revenue stream, attorney fees, transaction costs and who knows what other hidden costs. It is a bad deal for them.
I suspect we will see quite of bit of modification to existing loans once ARMS reset and borrowers cannot afford the higher payments and cannot refi because they are upside down. The “bailout” will come from within the lending industry itself.
