[oh8eleven]

If I purchase a home for $500,000 and take out a $400,000 mortgage and the value of the property declines to $200,000
Doesn't matter. You live in a house worth whatever the market will bear - $200K, $100K, etc., and you continue to make your monthly payment. Month after month, year after year, the value of the house may change (up or down), but you keep paying and there is no foreclosure.
However, if you decide to stop making payments (for whatever reason), then yes, you'll end up in foreclosure.

[kabar]

Doesn't matter. You live in a house worth whatever the market will bear - $200K, $100K, etc., and you continue to make your monthly payment. Month after month, year after year, the value of the house may change (up or down), but you keep paying and there is no foreclosure.

That's not the point. It is up to you to decide whether you want to pay and if you have a balloon loan or ARM you may not be able to pay. It is a personal decision and the fact that the mortgage may be twice the current value of the home in the example I provided, will influence any decision one might make. That's the point.

However, if you decide to stop making payments (for whatever reason), then yes, you'll end up in foreclosure.

Duh. What a silly statement. How else can the home go into forecloure?