When housing drops significantly in value the debt is higher than the value of the home, making it underwater: now it is better for the borrower to default than

When housing drops significantly in value the debt is higher than the value of the home, making it underwater: now it is better for the borrower to default than to make payments. If you get defaults, then the bank has to flip the home into the market, increasing supply and dropping price, etc etc. The narrative of 2008 has made lots of people believe that it was improper risk assessment, but the cycle of leverage and asset price fluctuation is the core mechanic and it acn easily repeat itself.