A large share of those mortgages were funded through structures known as mortgage-backed securities (MBS), and many of those structures were, in turn, funded by other structures called collateralized debt obligations (CDOs), in which subprime and alt-A MBS represented the collateral. These CDOs were ultimately held by a wide range of investors and financial institutions.
Much of the issuance of these securities over the past few years occurred in an environment of tightly compressed risk spreads – that is, the difference between the yields on what were perceived as relatively safe and relatively risky assets was much smaller than usual.