Actually, it's almost a wash. My bond purchase pays 4.125 at 5 years and I have a 5 year IO ARM at 4.25%. There's a slight amount of loss due to taxes and the difference in the rates, but it's less than I currently pay for my life insurance policy and just as important for my families financial well-being.
My plan is that if the bubble turns out to be a non issue in 4.5 more years, I'll cash out the bond and pay off the ARM (finding one with no prepayment penalty was a bear, but I got one). If, on the other hand, the bubble does turn out to be real, I'll have a large potential cash reserve to call on to help me through whatever difficulties may arise. I know that I'll still be on the hook for the debt even if the bank pulls the property, but that kind of cash gives you a LOT of options.
I also have the advantage that the outstanding debt on my first mortgage (a 30 year fixed) is about 30% less than its current appraised value, so our market can lose nearly a third of its current level before the bank-pull clause even becomes a possibility. My second doesn't have that clause at all.
"I know that I'll still be on the hook for the debt even if the bank pulls the property"
Now there's an ugly thought... in the event of a large-scale decline in value, a given mortgage company could conceivably call the mortgage, sell the property in the fear that it would lose further value, and then come after the mortgagee for the difference, thereby protecting their interests.
The laws governing foreclosure due to nonpayment surely don't apply identically, in a situation where mortgagee has continually paid on time, with mortgagor "pulling the note" due to "underperformance" beyond the control of the mortgagee, do they?