This story completely ignores the role of the lending institutions in encouraging and facilitating this. If the agents of those institutions encourage people to believe "this is how you do it", quite a lot of people will begin to believe that it is the new normal, and worry that if they don't get in on it now, they never will be able to do so later.

It is pointless to say "they should have known better" because lots of people simply did not, and this had bad consequences for many who did, including people who did act responsibly, but lost their homes anyway as a consequence of this recklessness.

It is more to the point to say that the institutions and regulators should have known better.

One reason this part of the story is being overlooked is that none of the executives responsible for encouraging and facilitating irresponsible and even fraudulent lending were sanctioned in any way (maybe they had a reduced bonus one year, and had the effrontery to claim that was unfair.)

Ironically, those who walked away from mortgages they could have paid were acting as rational economic agents.