Pre-Forclosure Update

My realtor told me that on the house we put the offer in on, the potential buyers did get into a bidding war and the offers were driven up beyond our maximum target price.  I find it disgusting how some of these mortgage companies have a practice of offering bad loans that end up putting people under a note that is more than they can afford and a mortgage that is more than the value of the home.  What is worse is that once these mortgages do fail, the lenders try to get others to bear the cost of these bad loans. Could this be another way that homeprices are artificially driven up?