Figuratively.
LOL!
These buyers are in a position where they bought speculatively with poor financing (interest only loans, ARM's, 100% financing) assuming that the value of these "investments" would go up.
Okay, they're over leveraged.
That is leveraged money that puts them in an analogous position to the short seller with a margin call he can't pay because the stock price went in the wrong direction.
No. A short seller benefits when prices drop. These people lose money when prices drop.
With the value plunging and their inability to meet mortgage payments (the figurative margin call)
A margin call is intended to bring your capital up to a safe (for the brokerage firm) level, the mortgage payment is like the debit interest charge in your margin account. Completely different.
these "greater fools" now must default because the asset they have to sell is worth much less than what they owe on it.
Having negative equity is completely different than selling short.