Those government programs (CRA) were the fuel which enabled the zero-down deadbeats to pay $500K for crapshacks in O’side.
The sellers of the houses in O’side (who bought during normal times) now had **hundreds of thousands** which they used for down payments on the next level up (say a 3/2 in Carlsbad)…and on up it went, right into the $1MM category. They could get $300K from their first home, use that plus a $600K no-doc, neg-am loan to buy a $900K house.
They haven’t been foreclosed on because plenty of them cashed out the $300K equity (from the down payment) and are using that to make the monthly payments.
The housing bubble was fed from the bottom up via all the “give poor people a mortgage they can’t afford” loans. The very bottom had NO equity (zero down), but the move-ups often had very large down payments which enables them to hold on longer. They have equity to strip and they can sell instead of foreclose…for now.
