I wonder if we'll ever know the answer to that question. Some people losing their homes were victims of bad lending practices. Some people, however, saw their houses as ATMs. In some cases people might have been pulling out money to fund emergency expenditures, but given the apparent volume of mortgage equity extraction it's hard not to conclude that lots of people were just enjoying the extra funds. There's a weird psychology to all of this. I stand by my earlier take that people didn't really think they were taking out loans, but were instead essentially selling off a piece of their home to the bank. That's what "mortgage equity extraction" would really be.
Still the question remains if, on the whole, those who were more prudent will come out ahead or if those who are defaulting on their home equity loans ultimately made the right decisions.
