Let's not pander to the media game of focusing on individuals who are losing their home, who to readers look like:
duh, how did you possibly think you could afford *that* house.

Yes their were some greedy lendees. Yes there were foolish lendees. And yes their were some foolish, greedy "flippers" and developers who should have seen that they were putting themselves into a potential financial vice grip.

However - there are two points that are largely missing in the discussion on this board about these stories.

1) There was a serious problem with predatory lending in urban areas since the early 2000, where home owners in poor, minority areas were targeted (especially the elderly) and told how refinancing could help with current crises (health, and otherwise), where a lot of fraudulent practices per hidden fees, not explaining complex resets, etc. left individuals unknowingly exposed. There was WIDESPREAD fraud. And when states like Ohio, tried to pass laws to prevent predatory/fraudulent practices they were overridden at the federal level with the now familiar claim (per EPA using it elsewhere) that allowing states to have their own sets of differing regulations would be too difficult for the "industry" and it was better to have a single set of federal regs (much looser).

2) There was a serious need to fuel the housing "boom" by whatever means from both Washington and Wall Street. On the Washington side, go back to 2002 with a slowed (recession) economy and the reports month after month of the one sector that was "booming" was.... the housing market (refi for home improvement; refi for consumer spending; new housing) - it was what seemed to keep the "economy" running. There was an incentive to turn a blind eye, and indeed when the bankruptcy bill finally was passed into law - all efforts to crack down on predatory lending was thwarted.

On the Wall street side, after the corporate implosions of 2002 there was a skittishness about getting back into the market, especially for large institutional investors (think pension funds) - suddenly there was a growing demand for these "safe" new financial vehicles that purportedly would provide a steady flow of money to the investors due to mortgage payments, and were purportedly leveraged in a way to lower risk. There were tons of fees to be made from lenders, brokers, rating agencies, etc. The reports on how little oversight (as in fiduciary oversight) was exerted is shocking. However, it was a new money train and who would want to rain on that?

3) Blaming foolish, greedy or preyed upon lendees is misplaced when considering the whole debacle. Except for the flippers and developers - these were folks engaged in a SINGLE transaction. The mortgage brokers, lenders, etc. were engaged in hundreds, thousands or tens (hundreds?) of thousands of such shaky transactions. Which has the greater impact on the debacle and melting down economy? The individual lendee? Or the lenders who dropped previously accepted practices (such as employment and income verification, studying the debt ratio of the lendee, etc.) in order to "make the deal"?

Please do not take me for saying that lendees have no blame. Many were foolish. Just the premise of the ARMS, as they became known, made my skin crawl - as my risk adverse nature just thought it was crap shoot thinking to finance a home with these things. However when we talk about the overall problems and possible fault lines running throughout the economy, lets keep focused on the culprits. One faulty/foolish loan is the blame point? Or the thousands of loans, the intentional blocking of tightening regulations on lenders, the greedy and due diligence roles of lenders/investors/bundlers being dropped to keep the money train flowing?