Along with what Mr. Star said (which was very good), home values were also overly assessed and the market seems like it was forecasted to do a lot better than they were. The banks loaned the money out figuring that with values on the rise, even if they lessee couldn’t follow through and ended up foreclosing, the house would be worth enough that the bank would still make their money. Home values dropped and all that loaned money is gone.
Someone please correct me if I’m off on this…