Bob should stop treating real estate as an investment vehicle and instead just use as you would a car. It depreciates, it appreciates, you extract benefit from it regardless of its speculative value.
So? The house is as livable the day before the mortgage went underwater as the day after mortgage went underwater. It only matters if Bob care about selling the house. If Bob's primary intent is to live in the house as opposed to selling it, it wouldn't be a problem.
But also it significantly limits Bob’s options in life. They can no longer refinance to repair the roof, they can’t move to a different city for a better job, etc.
Yes, that's the point...
>But also it significantly limits Bob’s options in life. They can no longer refinance to repair the roof, they can’t move to a different city for a better job, etc.
Bob knew the risks.
Within the legal system remedies Bobs everywhere are going to bankrupt. Banks can arrest the bankruptcy by changing the legal system, and Bobs everywhere can change the legal system to make bankruptcy more lenient.
At the end of the day a large portion of the population is not going to simply accept that they need to shoulder the losses for a bubble they didn’t make and had no perceived choice but to participate in. Particularly not when it occurs twice in two decades.
They (you?) don't have to accept it. That's not a factor at all. Your acceptance is not required.