HistoricalUnited States · Housing expansion through the 2000s; mortgage crisis from 2007
Housing: the house and the loan
- Before: the home is $100 and the loan is $80. Equity is $20.
- After: the home is $70 and the loan is still $80. Equity is minus $10. The borrower owes $10 more than the home is worth. The house is the same house; only its price tag changed.
- The mortgage slip did not move. Real obligations can change later, through payments, refinancing, modification or legal process. None of that happens in this instant comparison, which is built to show one thing only.
Interest The roof is yours after the last payment. I'll keep you company until then.
Nobody touched the house. It's worth less anyway.
In this example, selling it wouldn't cover the loan.
Imagine selling the house and handing the proceeds to the lender. In our example, the sale brings $70, but the loan is $80. There's $10 left to find.
Before the price drop, the home was worth $100 and the owner had $20 in equity. After it, equity is negative $10. These are hypothetical figures, with payments, interest, and loan changes held still.
The actual mortgage crisis also involved lending, securitization, collateral, and wider financial stress.
| Variable | Before | After the price change |
|---|---|---|
| Hypothetical home value | $100 | $70 |
| Hypothetical mortgage balance | $80 | $80 |
| Equity, value minus loan | $20 | −$10 |
Step between before and after
Before: the home is $100 and the loan is $80. Equity is $20.
After: the home is $70 and the loan is still $80. Equity is minus $10. The borrower owes $10 more than the home is worth. The house is the same house; only its price tag changed.
The mortgage slip did not move. Real obligations can change later, through payments, refinancing, modification or legal process. None of that happens in this instant comparison, which is built to show one thing only.
The $100 / $80 / $70 figures are an arithmetic illustration written for this card, not observations and not a figure from the cited source. There is no claim that U.S. homes fell exactly 30%, and this is not a foreclosure or recovery model. Not all mortgage lending was subprime, and the crisis had no single cause. The loan is held fixed by construction.
Sources
- Subprime Mortgage Crisis — John V. Duca, Federal Reserve History. The mortgage-securitization and credit-expansion discussion; the falling house-price effects; the policy paragraph defining underwater mortgages and describing modification and refinancing responses. The 100 / 80 / 70 example on the card is our arithmetic illustration, not a figure from this source.
These historical figures stay separate from the running debt comparison. Source review recorded: 2026-09-13.