Sadly, it does happen frequently. Many times, and I'm sure more frequently in these economic times, your credit is run shortly before your loan is due to close. The bank is looking for any last minute large purchases or signs that large sums of money (like for the downpayment or debt payments) have been borrowed. You would not believe how many people go out and finance new cars, furniture, trips, just before they close on their home loan. So, they may have done a quick credit check in the beginning and done a fast review and missed it. Then after the second check is run and they are really going over it someone noticed it.
It is a tough process to go through. Vent all you like. I know how all consuming buying a house is. Are you working with a broker or the bank directly?