Banks have the real mtg problem

All this talk in the press regarding the US homeowner as being in distress from the mortgage resets is not entirely true. Lets go through an example of the average person who bot a home in 2006 for 500k. They put down less than 5% (25K). Rolled their closing costs and taxes into the original mtg. Approx. 3K month is the mtg payment at 6% int. So after 2 yrs, the owner is in for roughly 100K. If the house is only worth 400k, the owner has broke even, but if the house is worth less, the bank is in trouble. Because this where the homeowner gains the upper hand over the bank. In the past, the banks assumed that real estate appreciated always and thus any foreclosures could be sold at a level above the remaining amount on the loan. Not so any more. In addition, given the problems with the paper regarding the mortgage (more than likely sold off to a third party and then sliced and diced into a securitized debt obligation), the current homeowner should stop paying their mortgage and wait for due process to take place. More then likely the current owner could live in the house for another 8-14 months rent free. Now who is in trouble. Even if the current homeowner could pay the mtg, why would they. They could simply refuse to pay and threaten to leave the property once their due process is complete. Foreclosures and the subsequent auctions are not what the banks want so the current homeoqner holds the upper hand. To date, few realize this fact, but given time they will figure it out and then the banks will be scrambling to negotiate loan terms.