Sorry Stan. I was getting default rates of the backing mortgages mixes up with home prices. It’s Friday afternoon and I’m not too alert.
I think the later posters made the point I was clumsily trying to make. What you describe makes sense for the first round of securitization, but considering that a CDO might be made up entirely of low-rated tranches from prior securitiziations, as one muggle’s link says, things could get bad if those initial tranches got wiped out.
