You guys are 100% correct that nobody had a gun to his head to sign the loan papers - he made a very dumb mistake. And I guess it wasn't a 'refinance' but more of a consolidation loan where he tied in other debt. Where I see fault with this particular mortgage company is that I believe they purposely make these loans at more than the value of the house because they know that once somebody is locked in, they have no way to escape. They are upside down the rest of their lives and can't refinance with another company.
I remember when he got this loan. He couldn't believe that his house value had gone up by 25% (coincidently the same amount he needed to tie in all his other debt) while all other real estate in Michigan was stagnate or dropping!!! Well, guess what? It didn't.
I understand that the bank can't sue for more than the value of the house, no matter the amount of the loan. So if it goes back to them, they sell it at a discount thru foreclosure, and he would only be liable for the difference between the sale price and whatever the actual value would be determined to be?? Am I thinking right on this?