I suppose you could argue, that the US home-owners who bought a subprime mortgage were engaging in "leveraging", since they were using their capital deposit to borrow money, in order to buy an asset which they hoped would appreciate in value.
But to my knowledge, most of the subprime contracts did not actually permit rescheduling the adjustable-rate mortgage to avoid the sharp hike in payments occurring after the initial "lowdown" payment period. Once you had the loan, you were stuck with its terms, and the only way to "deleverage" was to forfeit the property and walk away. A lot of the subprimes were sold to gullible buyers to buy properties which would not appreciate much in value anyway. Actually, in May 2008 Martin Feldstein argued that the federal government should bail out US home owners in trouble using cheap loans, in return for the home owners giving up the legal right to default on their "no recourse" mortgage (Financial Times, 8 May 2008). In Europe, a "no recourse" provision does not exist. If you have taken out a loan, you remain legally liable for the loan. J.
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