The problem isn't so much that people are buying houses they can't afford as the banks are run by business majors. The market gets soft, as it is now, and the banks realize the houses aren't worth as much as they lent for them. Joe Average is still making his monthly payments in hope that, by the time he is ready to retire, his house will be worth more than he paid. Then Bobby Banker, MBA that he is, realizes that Joe's house might not be worth as much as the loan right now today. Fearing that Joe might walk away and leave the bank stuck, calls and says, "Your house is worth $100K less than you owe. So, pay up $100K now and we will go on as usual. Otherwise, move out and we'll forgive whatever you owe more than we can get at auction." Since few people have that much cash laying around, Joe and his family move into their minivan, Bobby's bank eats it on half the houses they've lent money on and goes into receivership. Naturally, Bobby gets a huge cashout and moves on to destroy another lender along with the lives of hundreds of lendees.
