Mortgage-backed securities (MBS) have long been used to pool mortgages and enable investors to benefit from the monthly payments on those mortgages. This practice was popularized during the subprime mortgage crisis that occurred in 2007–2008, leading many people to believe that MBS played a major role in causing the financial disaster. While it is true that MBS had some influence over the issue, there were other more substantial factors involved as well.

A key factor behind the subprime mortgage crisis was predatory lending practices by lenders who granted risky loans to borrowers with poor credit histories or inadequate income levels. These high-risk “subprime” loans often carried higher interest rates than traditional borrowing options but still proved attractive due to their easier qualifying standards and greater chance of approval for potential homebuyers who could not otherwise obtain a loan.