“We have not seen—and don’t expect—a broad deterioration in mortgage credit quality,” the Fed staff said in a June 2006 report to policy makers. (excerpt from WSJ Article here).

“An inability to imagine how an outcome  might come about leaves you convinced that it will not happen.”(1)

(1) Thinking, Fast and Slow by Daniel Kahneman – Farrar, Straus and Giroux NY,NY Copyright (c) 2012 by Daniel Kahneman, p. 331.