That’s not really a significant driver of the subprime meltdown. Most of these mortgages are on properties purchased by US citizens who couldn’t really afford them. The individual mortgages were time-bombs to begin with, and when sliced and diced into complex mortgage-backed securities and purchased by hedge funds using significant amounts of leverage, the fuse was lit on the whole pile.
The sub-prime market financing has been being used for quite a while. Up until now, demand has kept prices up and rising, preventing anyone from getting caught. When demand fell, many got caught holding the bag.
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