> The trick is you need to live somewhere. If you can't have a loan, the money goes to rent.

The difference is that a landlord wants a tenant who can actually pay the rent, but banks often hand out loans that are far more than the new homeowner can afford.

If a tenant can't pay their rent, the landlord will have to go through a long and painful process to remove them and find another tenant, and they'll likely be out many months of rent in the process, with nothing to show for it. If the bank doesn't get their money, they own the house, they get paid whatever costs they can't recover by PMI (which the former owner had to pay for), and they can potentially offer a loan to the next sucker to buy that same house.