Why Didn't We See The Warning Signs Earlier?

From a NYTimes article on the recent troubles in the subprime mortgage market [emphasis mine]:

Now, some would-be buyers like Matthew Hennig are having to put off their dream of homeownership. In early July, Mr. Hennig, an air-conditioner repairman, signed the contract to buy his ideal home, a two-bedroom condo overlooking a swimming pool in a Phoenix suburb.

A day later, however, as he was on the job in a sweltering attic, his loan officer at Fairway Independent Mortgage called to tell him that the $185,000, no-money-down loan Mr. Hennig thought was a sure thing had been denied. Why? He was a first-time buyer with little credit history.

Unlike the professionals on the trading floors of Wall Street who lost billions and now seem shell-shocked, Mr. Hennig has moved on. Mr. Hennig, who earns about $40,000 a year, is now renting a room from a friend and saving up the money for a down payment when he tries to buy again in a year or so. He has also recently opened a charge-card account to bolster his credit score.

And a year ago, he would have been in like Flynn. I wonder why it all fell apart?