By not requiring a larger down payment, they show they were assuming there wouldn't BE a significant decline in asset values. In addition, they were assuming there was some invisible "moral obligation" clause somewhere in the contract.
They were wrong on their assumptions. Thats the reality of taking risks. The future is uncertain.
Yup, and those that lent recklessly are experiencing higher rates of default.
I’m not arguing with that. What I’m arguing about is that people who can pay, but won’t, because the house price declined.
No one forced a person to take a mortgage for 100% of the value. The borrower signed the papers. There was no invisible “moral obligation” to pay - the terms were in writing, and repayment was not contingent upon the value of the house.