The fault lies entirely in the banks and rating agencies that sold those mortgages as parts of CDOs that had been rated AAA when, in fact they definitely weren't.

The fact that the banks could make more money selling those CDOs than the profits from the actual mortgages led to banks being far more willing to issue loans to people who couldn't demonstrate a sufficient ability to pay. Who cares, after all, it's not the mortgage that'll make money for the bank!

And with banks playing fast and loose with mortgages, it allowed an influx of a lot of money into the market which ended up bringing up the prices of housing stock. Since, if money is cheap and available to the buyers, the sellers would have to be fools not to increase their prices.

And when the bank's irresponsibility finally caught up to them, the whole system fell like a house of cards.

How this would have played out in a normal world without commercial banks being investment banks as well: bank would issue mortgages, and since they rely on the return of those mortgages to finance their profits, they make sure that those receiving the mortgages have the ability to pay. Some foreclosures still happen since shit happens, but the banking system in it's entirety chugs along as per usual.