These loans are doing horribly – something like 90%!!(yes – I was shocked to see that) of the loans are only having minimum payments made, thus acquiring negative amortization. These loans are then expected to default EARLIER than the CreditSuisse table above.
So – no capital investment in a house = smarter to walk away. The former “owners” were really only renting the house, and they have no equity in it. This is going to be really bad here in California, where 50% of the jumbo loans are made.
I expect future bank behavior will require a minimum 20-30% down for future loans, to prevent such behavior happening again. An investment will tie the owner into the house (I worked hard for it – I don’t want to lose it), making them them much less likely to walk away.
