Wow, Patrick, that is bold.  I too saw those deals and heard the very same things from many borrowers in closing.  I also had a few walk away when the deal was "fully" disclosed.  To say that the lenders are not being fraudulent is quite a stretch.  I can't tell you how many times I heard the words "my loan officer said" or "promised me we would refinance at an even lower rate next year".  Those words in my mind constitute fraud and the poor suckers who bit into it were just that suckers.  I know that sounds cruel but the truth is the truth. 

The basic tactic was to get them to sign no matter what!!  Tell the borrower what they want to hear true or not (seen it first hand by some less than moral loan officers).  Not once would these so called promises appear in writing.  Not one loan officer would make a writen promise because they can't.  They lied - end of story!!  Promised them everything and gave them nothing but trouble. 

Now, lets get to the lazy borrower who did nothing but spend and spend again.  Gee wasn't the Presidents advice?  Get back out there and prove those terrorist wrong.  We aren't scared and our econmony won't fall was the gist of the speeches.  The american Joe heard ... Spend, spend, spend - loan officers conviced them it would work too.  Not once did anyone speak of responsible spending or paying back these debts but we live in golden america where you work hard and get rewarded right?  Not true as most of us know.  From my experience the borrower is not well versed in the working of lenders/creditors and once sucked in can't get out especially when you live pay check to pay check and over bought because a Realtor and Lender told you what you could afford and conviced you to max out the purchase/refinance. How many second mortgages did you close with those first because it lowered the rate on the first?  When the borrower balked at the second the first was off - a must have 2nd to get the first with the tag line "you don't even need to use it, just sign it and get it done."

Even the most responsible borrower, that really did try to fix their credit and some I saw again succeded at this goal, still got screwed by the higher rates, granted still low compared to the 80's.  The rates were never as good as they were promised and many left with terrible feelings of having been duped. 

"Spending the equity as the home value increased." you said.  Well, more fraud by the lender.  Who do you think set the value of these homes????  You guessed it!  The Lender.  Wow, imagine that.  The lender that promised you everything had your appraisal upped (we all know how that worked right?) and sold the borrower on it.  Again, more fraud. 

One more note before I leave you with my rant.  Why is that there are some many going thru investigation, to court or jail (once found guilty), of fraud if there was no fraud going on?