Her main loan was a 5 year, interest only loan, probably at an adjustable rate. What that means is that for the first 5 years, she ONLY paid interest...that is to say, she did not pay down the principal. At the end of the first 5 years, you start paying down the principal and interest, only that's now compressed into 25 years instead of 30. In short, your payments increase.
People took these loans out because they assume that in 5 years there house would be worth much more than it was when they bought it (of course, because housing always goes up, right?). So the idea was, in 5 years, when my house is worth a lot more, I can just refinance it.
If it sounds foolish now...well truthfully it sounded just as foolish at the time (as I recall when I learned about this stuff back in 2003). It sickens me that my tax dollars are bailing people like this out (directly or indirectly).