The impending federal bailout of mortgage markets has a principal cause --- lax lending standards, such as sub-prime mortgages and an exaggerating cause --- excessive land use regulation, which drove house prices up beyond any precedent. More than 80 percent of the housing cost increase since 2000 occurred in markets with excessive land use regulation (also called "smart growth"). Without this excessive increase, the financial crisis would have been far less intense or may not have occurred at all.
These policies, often referred to as "smart growth," create a scarcity of land, artificially raise the price of housing, and, again, have increased the exposure of the market to risky mortgage debt. When more liberal loan policies were implemented, metropolitan areas that had adopted these more restrictive policies lacked the resilient land markets that would have allowed the greater demand to be accommodated without inordinate increases in house prices.
For more detail see:
How Smart Growth Exacerbated the International Financial Crisis (Heritage Foundation web memo)
How Smart Growth Exacerbated the International Financial Crisis (report)