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Some rumor about mortgage and equity if the house looses value.

Sorry for the silly question, but I’ve been hearing something from my friend that I’m having a hard time understanding about mortgages. I want to see if anyone has an answer for it.

Let’s say I put a down payment of $300K on a $1M house in the Bay Area, California, and take out a 30-year mortgage loan for the remaining $700K. If the house value drops to $500K in 3–5 years, my friend told me that I would need to pay the difference in lost value ($700K - $500K = $200K) before I could continue making my monthly payments. Otherwise, the bank would "take back" my house.

Can someone help me understand this? I thought that as long as I kept making my monthly payments, I would be fine, even if the house price dropped. Why did my friend say I need to pay the lost value difference to the bank to keep the house?

Thank you!

submitted by /u/Smileeeeeeexd
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source https://www.reddit.com/r/RealEstate/comments/1ihauky/some_rumor_about_mortgage_and_equity_if_the_house/
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