I think to a large extend, most of the people could pay back the loans at the time. But, many were on the edge. When gas prices went to over $4/gal., that tipped many over the edge. I came down for many, get to work or pay bills. So that tettered the housing market on the downward slide. The economy came crashing, oil went down.
Gas was down to $1.50/gal. I think at that point, the economy would just need about 6 months to recover, or show signs. OPEC etal. chopped production. Gas went up. The economy struggled.
Yes, many were upside down in their loans, before they paid the first payment. Some got loans, they could only pay with future equity of projected value. Sort of to big to fail. I would have been happy to see some of those idiots, both corperations and individuals, have a rude awakening. Unfortunately, the idiots would have drug us down to their level.
Tom