The old model of school (the one that still seems to be the most popular and the most familiar) is based upon the idea that the teacher is the authority and delivers knowledge to the students.
While this works relatively well in most cases I don't think it is the best model. Most “progressive” educators would rather schools are more student centric. Allowing students to drive their own education.
I don't really want to go into that at the moment. Let's get into the connection between our current economic crisis and our current school system.
At the moment even though the reform education moment start with John Dewey around 100 years ago most classrooms are still based on students sitting quietly and taking instruction from the teacher. Even here where I live in one of the “better” school districts we can see evidence that the students are taught at a very early age to be quiet and listen to the teacher.
If students are in a situation where they are expected to be quiet and listen to the authority from age 5 to age 18 I think most will be fairly well indoctrinated.
What does this have to do with failed mortgages?
Simple, ask yourself who is the authority on mortgages? That's right your mortgage broker. I've done it myself. I ask the mortgage broker what mortgage can I get with the money I make and wait for him/her to come back with the answer. My fact checking is limited to maybe an online mortgage calculator or shopping around. (The shopping around part usually leads to looking for a higher mortgage with better interest rates). When the mortgage broker says you can get this amount of money at this rate most people assume this is a good and safe proposition.
Of course there are many folks who looked the broker in the eye and said, “what are you nuts?” On the other extreme there are just as many folks who said, “Why not refinance every 6 months and take more money out of the house?”
I'm fairly certain, though I don't have statistics to back this up, that most home owners took the first offer from the mortgage broker as the best offer because he/she was the authority and they just aren't used to questioning authority.