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"I understand that, but aren’t most of the defaults from subprimes that didn’t put up 20%?"

1) People who shouldn't have been able to get loans got loans through Fannie/Freddie (government guarantees). The govt guarantee WAS the PMI, get it? So when these deadbeats stopped paying and their houses went into forclosure, it began flooding the market with available houses and lowering market prices. 2) People who got 80/20 loans, and particularly those fools who got 80/20 INTERET ONLY loans, then had their 3- to 5-year fixed portion expire and they needed to refinance on a fixed-rate loan. However, they couldn't refinance because the value of their house went DOWN because of the flood of houses on the market. So those people started losing their houses. That's how it worked.