Most lenders don't want to foreclose. They'll make more off of the loan than off of the foreclosure, so (in most cases) they'll work with the borrower to figure something out. The problem is though, that it's only a matter of time before there's some tax break for ARM holders and lenders, or something similar involving government money. I'm for letting the market correct itself, then perhaps the banks won't be so hasty to lend on non verified income, and people won't be so hasty to snatch up a zero down ARM.
But that might make sense, so it's probably a no go.
