Why does refinancing become difficult when house prices fall?

Arlie
From what I gather, if your current home value is lower than your outstanding loan, you're in trouble. And why do people default and foreclose on their homes when house prices fall? Could someone elaborate on this? I can't seem to comprehend it. Thanks!

Arnita
Their mortgages started at intro terms that they could afford. They can't afford the mortgages once the terms adjust. The idea was that they would be able to refinance. They can't refinance because they owe more than the house is worth.

Aimee
its the other way around. house values drop when loans become harder to get. Loans get harder to get because either people default and banks tighten guidlines or interest rates naturally rise according to economic factors. NOW. if you put no money down on your house then your value goes down you cant refinance your mortgage if you have an adjustable rate that is going up. Since you cant afford the payments AND cant sell the house without a loss and cant refi you end up foreclosed.now banks will modify your loan usually if your 'upside down' since they loss money too on this venture. If you need to know how to modify your loan email me and ill explain.

Glynis
The whole idea of owning real estate is that you could sell it after 1 year or 20 years and walk away with a profit. It was an investment. When the house is worth less than you owe, the "investment" is gone. The only question is whether the seller will pay money to sell the house. That is the exact opposite of making a profit. It will take a while for people to get used to this new world..