hence the post 2005 incentive to mega inflate the value.
banks could then do 100% loans and the borrower could second mortgage the down payement.
Yes, but it really goes back to that Boston Fed study in 1992, after which it wasn’t acceptable for banks to maintain traditional down payment (or credit or income or asset or verification) requirements because of the perceived ‘disparate impact’ on minorities, who qualified for fewer loans when such standards were applied.
Kind of like grade inflation at colleges to cover up the lesser performance of academically less qualified affirmative action students, the feds decided such standards in mortgage lending could no longer be imposed on the market.