[kileywm]

> should your mortgage go underwater you will lose that home

How did you arrive at that conclusion? I'm no expert in that field, but an underwater mortgage really means a decrease in mobility for a mortgage borrower (example: if they want to sell their home and relocate, then their sale proceeds will not cover their full liability). It should have no bearing on the ongoing affordability of that mortgage which is the primary cause of a mortgage borrower losing a home. What am I missing?

[fortran77]

You're exactly right. You will not lose a home if the value of the house becomes less than you paid for it.

What happened during the crash was people bought homes they couldn't afford on "teaser rates" and assumed they could keep refinancing using the existing equity from the appreciating value as a way of getting a conforming mortgage at a better rate, or taking the equity out as a loan. When this didn't happen, they walked away from the home.

Many of these people who "lost their homes" didn't really lose anything! They were living in a house above their means, that they often bought with no money down, paying interest-only, or a "teaser" rate (sometimes with negative amortization!). Then when the house went underwater, they walked away, not owing a penny. _Then_ they declared: "woe is me--I lost my home!" when in reality they got a sweet deal.

Many even lived mortgage free for the year or two it took the bank to foreclose. Congress forgave the income tax on forgiven debt (normally taxable) and nobody was made to pay income tax on the imputed income of living rent/mortgage free while waiting for the bank to kick them out.

[topkai22]

This is really unfair to those people who experienced it. From a financial sense you are of course right- they got use of a house for “free”. In a human sense, many people lost their homes- they were forced out of the places where the lived, where they’d invested their identity in, time, money, and emotion in decorating and “making their own.” Children were forced to change schools, and adults were essentially publicly shamed.

There were some people who definitely behaved the way you described, but many if not most experienced true suffering in a way that deserves compassion.