Correction: It was the mortgage brokers, not the banks
The people pushing the neg am loans were independent mortgage brokers who did not work for a lender. Banks who actually hold the notes were not the ones pushing these low start rate loans (at least at the earliest) This was a new phenomenon. Previously, loan officers were employees who brought in business to Banks and S&Ls. Banks generally do not lend to those unlikely to pay off the loan. At the end of the bubble, the banking institutions did follow the competition and did make unsafe loans, but the smart ones sold the notes off to "wall street" instead of taking on the risk.
Many people who bought houses in those days did so because they thought it would make them rich. The borrowers were sure housing would continue to increase in value. They were willing to borrow in order to pay$200,000 for a property that would soon be worth $300,000. People could qualify for a loan with less income using a neg am than a traditional 30-year fixed.
The U.S. government also encouraged loans to low income people using "red-lining" rules, that changed the equation to make such lending more likely than before.
Biting the hand that feeds IT
