Apparently I don't know anything about mortgage contracts. I thought the house was the only collateral, and if you were foreclosed on, the bank took it and that was all. It seems that if the sale of your foreclosed house doesn't cover the mortgage, then they can come after you for the difference.
If a mortgaged is really secured by a house and all your assets, shouldn't the interest rates be even lower than they are now? Particularly if I have a lot of other assets outside of my house. I understand that from the bank's point of view there is a moral hazard for people with underwater mortgages to just walk away from their properties. However, the bank was supposed to be underwriting these people and the housing market and couldn't predict the crash in home value, so how do they expect the average person to have predicted it.
Whatever happens here will have some serious ramifications throughout the industry, particularly for vulture investors.
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