Post #4095091
2026-07-25 10:47 UTC
But even with these foreclosures, lenders and their customers lost hundreds of billions on the subprime crisis. That's because all that subprime lending pushed the price of houses up and up and up, so when the market collapsed, those mortgages were "underwater" - the money from selling the foreclosed homes didn't cover their outstanding loans.
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Replies (1)
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@pluralistic@mamot.fr 2026-07-25 10:47
Collateralization - backing loans with legally binding promises to surrender some asset if you default - is a way to *reduce* risk, but it can't eliminate it. Assets degrade: houses burn, cars get totaled, jewelry is stolen. Assets also devalue: a loan backed by bitcoin at $111,000 on the eve of Trump's election will be underwater today with bitcoin at $64,000. 14/