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What's worse, the vast majority of these loans were extended based on "stated income," which means the bank didn't verify the income of the borrower. Of course, consumers usually have to pay more if they don't provide tax and payroll records to the bank to verify their income. Common sense suggests many are fibbing about their income to qualify for a larger loan.

I've signed on for two car loans and four mortgages in my life, and every time I had to provide actual pay stubs and tax forms and the like to verify income, as well as documenting my savings and sources for down payments or potential money reserves.

What kind of places are just handing out money to anyone who claims to make X dollars?

"I've signed on for two car loans and four mortgages in my life, and every time I had to provide actual pay stubs and tax forms and the like to verify income, as well as documenting my savings and sources for down payments or potential money reserves."

For mortgages, you selected "full documentation."

However for several years, lenders have offered "stated-stated" loans, which means they accept your claims for income, and assets.

Another option is "stated-verified" which means they accept your claim for income, and verify your claim for assets.

The latter is legitimate and applies to self-employed, cyclical income, etc. If you have a substantial down payment, and verifiable assets, the lender takes little risk.
Our resident alarmist overlooks the fact of rising home values virtually everywhere, for several years. This means most people have significant equity, allowing them to re-finance if their present loan reaches onerous terms.

Since these homeowner-borrowers do have substantial equity, they will "find ways" to survive.

Finally, if a downturn hits real estate and home construction pretty hard, it will induce a national recession. The Fed will reverse course and loosen up on interest rates, thereby helping the economy and real estate.