No, the borrowers don't have equity in their homes. They are first time buyers. Lenders have been selling Payment Option ARMs to them. The borrower can choose to pay less than what is required to cover even the interest on the loan. The difference is added to the principal.
It's not that hard to understand. So what is the point of your accusation? Does it mean that if you yourself aren't familiar with something, then it must be a lie? Is that omniscience or simple infallibility that you possess?
With all due respect, when you said
"...the borrowers don't have equity in their homes. They are first time buyers..."
you were painting with an over-broad brush. Last year, the 25-year-old son of a good friend bought his first house (a condominium) for $140,000 and invested $50,000 as his down-payment.
He could have bought something bigger -- but he did not want to have to sell any of the stock in his portfolio.
So I don't believe for a minute that ALL first-time home-buyers are as "stupid" or "over-extended" as you claim they are.
Since your claim has been proved to be false, why doesn't the "L-word" accurately describe you?