[gammateam]

> The subprime crisis was precipitated by a lot of people taking out mortgages with either blatantly or coerced false income information in their mortgage applications on homes that had inflated values.

Yes but this was exacerbated because it wasn't as many people as what you said seems to suggest.

The investment banks were so highly leveraged on the collateralized debt that it only took 7% of the mortgage holders missing payments at once to bring down the whole financial system.

This suggests that the vast majority of people lying can actually be trusted to make payments, and would prefer to not be shut out of the credit system.

[heifetz]

15 - 20% of subprime borrowers defaulted on their mortgages. That's a lot of people! Imagine, 1 in 5 of your neighbors defaulted and were foreclosed upon. This is not suppose to happen.

https://www.chicagofed.org/publications/profitwise-news-and-...

[gammateam]

Thanks, yes thats a lot. I'll double down on what I wrote as the CDOs contained a mix of all borrowers of all levels of credit worthiness. It is likely we are agreeing on our stats, but I will concede that the subprime variant therefore can't be reliably trusted to make payments, just as the models predict.