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Originally Posted by Nothing
For the former kind of people, well, that's a pity that they'll get boned, but they should have been smarter than to buy in a bubble, and besides, once they get over their bankruptcy in a decade or so, the market will be much more favourable.
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I may be misinterpreting you - but even if the "value" of your house drops below the size of your mortgage, you don't suffer any instant repercussions. You don't immediately become bankrupt, as far as I am aware.
People agreed what they were happy to pay for their house, and they agreed what they were happy to borrow. They agreed to continue to pay for n years, and life goes on, assuming they still have employment. At the end of their mortgage term, they've paid far more than their house is worth, it's true - but this is the case with most mortgages, and people are doing everything they can to get one!