The recent surge in delinquencies in subprime ARMs is closely linked to the fact that many of these borrowers have little or no equity in their homes. For example, data collected under the Home Mortgage Disclosure Act suggest that nearly 40 percent of higher-priced homepurchase loans in 2006 involved a second mortgage (or "piggyback") loan.
Any contribution to the prevention and solution of such crises cannot but enhance the markets’ ability to function. And in this context it is not very helpful if the IMF unduly emphasises its financing role and steps in at an early stage with overly large financial packages. That only creates moral hazard problems.