Now that is an interesting post! Thank you. I just have one question -- do banks have that option without gov't approval/intervention?
Yes. Many mortgage agreements have that provision. If the value of the home goes below the amount of the mortgage they can pull the mortgage. I think all interest only agreements have that clause.
During the last bubble in Massachusetts they pulled so many mortgages that the housing market collapsed. The banks didn't want to pull them because there was such a glut of houses on the market they couldn't get their money out. The Feds came in and forced the issue because they were getting stuck with failing banks, the Bank of New England for one.
It was a GREAT time to buy. Those times are coming again. Cash will be king.