How so? If the assessed value drops in half, the same payment pays of the house much quicker than before. One of the reasons people historically buy houses is not only as an appreciating asset, but because its more cost effective than renting. Imagining doubling your principal payments without adjusting your payment?
Suppose they pay off the principal without the house recovering its original price? They make out and the bank gets screwed. Their "rent" drops to almost nothing. And then later if the price recovers? WIn win
Yes. It's a bet with winners and losers. Right now the banks are able to buy derivatives to hedge against their losses. What protections do homeowners have? None. There is no insurance against losing value on a dog of a house, none' but there ought to be. I say get rid of the derivatives and put the bankers against those truly on the other side of the 'trade', homeowners.
Otherwise you get this jibberish: Debunking Some Myths About The "Greek CDS Contagion" Threat http://www.zerohedge.com/article/debunking-some-myths-about-greek-cds-contagion-threat via @ZeroHedge