The excessive lending itself would not have brought in such great financial distress because if the borrowers turned out to be poor borrowers, then foreclosures would just have followed. However, what made this risky behavior turn into a crisis event was the bundling of mortgages by various financial institutions into complex securities such as collateralized debt obligations (CDOs) which were largely unregulated.
BIS Review 13/2009  1  These complex transactions were designed in search for yield and new markets. The securitized products were sold to banks, Wall Street firms and overseas investors. The continued appreciation of house prices ensured attractive returns for these mortgage-related securities.