What are your thoughts on this?
I used to work in the mortgage industry as a loan officer. I don't have a lot of time to go into it right now, but it was fucked up, even on the small scale. Policies have changed since then, but damage was still done to the economy via great sales people who knew how to make a bad deal look good and also knew how to use their friends to say houses were worth more than they were.
These people, and the government's housing programs (Fannie Mae, Freddie Mac), are responsible for making it look like there was far more demand for housing than there actually was. Now everyone has houses that are worth far less than they paid for them.
What many people don't realize is that this affects the whole market. If your neighbors buy a house and it's appreciated at far more than it's worth because the mortgage broker used an appraiser who was his friend, then the actual value of all the surrounding properties goes down.
Basically, there are more houses than people who can afford them, so the price of the house drops. Thus, when you go to sell your home because you can't afford it, you wont get near enough money to pay off the loan. Also, if enough of these move into your neighborhood, the value of your property will tank, and you wont be able to refinance for the amount you should.
Overal, what's bad for your neighbors is bad for you. Also, if a small-time mortgage broker can do so much damage to the economy, imagine what a corporate bank can do.
Just some thoughts from personal experience.