Originators lend the money and sell the loan. It is agreed that the originate to sell model has perverse incentives. However, the point is that home borrowers are not the victims of this fraud. The people who bought securities backed by these loans are the victim of the fraud.
The homeowners got the money, the investors lost the money because the homeowners can't pay it back. The originators and the securitizers (Citi) facilitated the fraud, because they got their cut as the money passed through the pipeline.
Homeowners were mislead as to the viability of the housing market & the concept that a house was a great investment. Many wanted to get in before it got "too expensive". Many of the loan products on the market were misleading as far as the actual costs and mortgage brokers who were hungry to get people into houses often glossed over explaining the viability of the loan.
Some homeowners were stupid, but most people are their own unpaid, untrained, part time financial adviser. The banking, investment & real estate industries have extremely well paid employees who should know better and are paid as though they do.
The homeowners got the money, the investors lost the money because the homeowners can't pay it back. The originators and the securitizers (Citi) facilitated the fraud, because they got their cut as the money passed through the pipeline.