The Home Loan Crisis

Who COULDNT have seen this coming? Not too hard when you're older and have experience in buying property.. the old metric was "total price equals 4X annual income". And required 10 percent down.

And since before 2000, we'd seen mortgages offered at even 110% of listing value and zero down. Of course, coupled with ARM, makes it even worse.
To make it clear, the buyer had NO equity in the house he was buying, even at the inflated value of the 'hot market'. Now that the values have dropped, they have no hope of any recoverable value in the foreseeable future, and it's just too tempting to just walk away. Which reduces the value of all the OTHER houses in the neighborhood. A real problem in 'New Build' plats.

Here is the best opinion I have read on it.

When this started to break I wondered why the financers didnt just write down the values, refinance under more reasonable terms and write the losses off instead of allowing the buyer to forfeit the property, further flooding an already glutted foreclosure market.
I hear that some have done so, but perhaps not enough. And the tax writeoff is the ONLY way government should be required to intervene.

It comes down to greed... and greed is always caught out. This, actually, is the beauty of the free market.