Yes, I agree, if the borrower is overleveraged, it wouldn't very wise for a lender to make these loans. Let me throw this alternative out there. Let's say that

Yes, I agree, if the borrower is overleveraged, it wouldn't very wise for a lender to make these loans. Let me throw this alternative out there. Let's say that you have a million dollar home that is paid in full(no mortgage or any other liens on the property.) You decided that given the uncertainty, you want to make sure you have a years worth of expenses in cash. The lender decides that they will lend you 100k (only 10% of the value of the home) at 2%(well above the fed rate which is near zero) as long as you agree to a lien on the property. Even if the home loses half of its value the lender will still be made whole.