let's say you buy a house for $120,000. you put down $6,000 - $10,000 down payment, and are consistant in maing your monthly payment of let's say, $800/mth.
the economy starts to get bad, and the banks are getting worried, and your mortgage suddenly goes from $800 to $1,400 mth.....then it is jacked up to $2,200 mth.
eventually you can no longer afford to make those payments. but you have already sunk a large amount of money into your home....down payment, monthly payments, any renovations you may have done......suddenly, you are being foreclosed on.
all that you have invested into your home is gone. the banks have it, and now they are taking your home, and you will still owe them $. (i think?)
they then turn around and re-sale your house, and the process begins again.
the banks don't care if they lend you more than you can in reality afford, or if the economy is shaky, and uncertain. they want your down payment. they want the interest, they want the payments, and then they want your home, so they can do it all over again.