A number of investors failed to perform their own research or due diligence and instead relied too much on credit ratings as a measure of the ultimate risk in holding these complex debt instruments. In doing so, they failed to take into account other risks such as liquidity risk.
The complexity of these instruments frequently made them opaque, and too often investors put their money and confidence into investments that they did not fully understand. At the same time, U.S. policy interest rates rose, and the basic loan quality of U.S. subprime mortgages worsened through 2005 and 2006, although this worsening did not become broadly apparent until the first half of 2007.