Quinn's situation isn't unique. It's happening in a lot of places. It's just a shock when someone you know is having it happen to them. What probably happened is that the owner took out a sub prime loan or took out too much equity thinking that he would be able to sell it at a profit. The housing market in HI is doing fine from the reports that I had been hearing, but it's not crazy. Local lenders had been more conservative as well. Most of the subprime problem in Hawai'i has been caused by outside lenders.
Update: Fix spelling mistake in title. Also note that it is Washington Mutual that owns the mortgage. WaMu is in trouble because of all of their subprime lending.