It's said that people are ultimately responsible for their actions, and I agree. Wholeheartedly... Because in the end, when someone if boned, it's their reality. Thankfully, we've got the division of labor thing going so people don't have to be lenders or real estate agents to get a home. Whose burden of responsibility is it to say "No, you can't have that home"? I keep hearing that it's government regulation with the Community Reinvestment Act that caused it, but the act was only compulsory to Fannie Mae and Freddie Mac which handled roughly 33% of the secondary loans to low income families. That left 66% loosening up their underwriting standards
and giving loans to people that were guaranteed to not be able to afford them. The 66% were companies not covered under the CRA, which did not have to give out the loans. The only reason the loans were a good investment was because they could be repackaged into CDOs and sold off, leaving the risk with the last sucker holding the bag, which was not the underwriting firm. They didn't have a pound of flesh in the game after the securities were sold. The individuals who could not pay the mortgage lacked the sophistication to tell they couldn't afford it was only part of the problem. I know if Tyrone Biggums walked up to me asking me for a loan, while I knew he had no job and a $300/week crack habit, would make me the asshole for giving it to him. Sure, he shouldn't have asked for it, but that doesn't put that money back in my pocket. Maybe there should be a fiduciary duty in the housing and lending markets to ensure the loan meets the expectations.
tl;dr making bad loans was not compulsory to private lending instututions. They did it because they saw dollar signs instead of what it really was: a plan designed to fail for private institutions due to the inherent risk. Subprime means less than optimal. If you're putting your own money up, you're not going for subprime.