The mortage defaults were never allowed to refinance.
The bubble busting made their home not worth enough for them to qualify.
They owed more than the home was worth.
But they still would have kept making their old payments because they would want to protect their down payment.
But they could not make the new ARM payments that as much as doubled.
There were no 1% interest mortgages.
They lowest mortgages during the bubble were around 8%, and the bust made them jump to over 15%.
The drop to 3% did not happen until years later, when there were so many foreclosures that banks had to eventually drop rates.
Almost no one took out real estate loans they could not afford.
They were making the payments successfully, and could have continued doing so.
It was their rates being jack up deceptively by ARM loans that forced them to default.
Do you think they just wanted to throw away their down payment and years of monthly payments?
They liked being make homeless?
Again, read about the LIBOR scandal.
Libor scandal - Wikipedia