Why has the American mortgage problem had such widespread consequences?

I get that falling housing values can lead to defaults, and I get that an economic slowdown can lead to defaults, and I get that rising interest rates can lead to defaults on ARMs, and I get that there were a lot of lousy mortgages made recently that never had a chance. But even if you ume that all the homes in America lost 20% of their value, and that 20% of American mortgages went into default (which I think is bigger than the current problem is), how would that freeze up world credit markets? I just don't think this one problem in one sector of the economy is big enough. How did this become so multiplied in size?