>>>The rule used to be that you could only get a loan for 80% of the purchase price (except in some special cases). What happened a lot in the last few years is that the lenders set up special plans where the borrower could borrower the whole thing. That's part of why it's all collapsing.
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>>>Tamar
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>>Banks did it because they knew that they will be able to resell the loan and it was feasible because Fannie and Freddy supported mortgage resale market, and everyone was sure that government, i.e. taxpayers, will bail out Fannie and Freddy when the pyramid breaks... and it is all was correct.
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>I agree with partway, but I disagree that people expected government bail-out. For that to be true, they would have had to expect the housing crash, and I think most people never did.
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>Tamar

I feel we are getting here to human nature issue. It might happen that many people are stupid (i.e. never thought housing situation out), lazy (i.e. never wanted to think housing...), greedy (i.e. wanted to make too much money and didn't think housing...) or even malicious in their intent (i.e. wanted to trick lenders and didn't think housing...). I wonder why humble idea that some of them hoped on bailout cannot be allowed to this circle? I think it fits.