Eventually... But we have to remember that things moved in waves. 2006/2007 was when the foreclosures started happening. Interest rates started going up in tha

Eventually... But we have to remember that things moved in waves. 2006/2007 was when the foreclosures started happening. Interest rates started going up in that timeframe [0], which lines up with the idea that folks couldn't refinance their ARMs into something they could keep paying on; first due to the higher interest rate, and second because the higher interest rate cause their house values to plummet. As these defaults piled up, in late 2007 and early 2008, the banks who later folded realized that their portfolios were not really salvageable. [0] http://www.freddiemac.com/pmms/pmms30.html http://www.freddiemac.com/pmms/pmms30.html