The lending community had become complacent with a Wall St investment community that had an enourmous appetite for subprime and ALT-A mortgage paper. The lenders only acting as repackagers would bend guidelines to keep the volume growing. The number of mortgage lenders increased dramatically during 2004-2006 this resulted in no pricing power to compensate the lenders and the Wall St banks that purchased the loans for the added risk. The lenders and banks were scrapping the bottom of the barrel of borrowers during late 2005 and throughout 2006 to keep loan volume growing or stable because every company along the way was selling off the risk to other parties but would reap billions in fee revenue on the deals.
Then the party ended when the defaults finally appeared. Folks who took these loans were told that they could refinance into lower rates when their credit or property values increased. With falling real estate prices and loan programs disappearing by the day this won't happen for millions of families. The punch bowl is being removed and homeowners are waking up to the sober reality of losing their piece of the American Dream.