Summary

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In the $2000$ s$,$ specialized mortgage brokers were allowed to originate mortgage loans. Earlier mortgage loan originators were Savings & Loan associations $($S&Ls$)$ or banks.

Mortgage payments based on short$-$term interest rates$-$called adjustable$-$rate mortgages $($ARMs$)-$were preferred by subprime borrowers.

Securitizing companies, such as Merrill Lynch$,$ Bear Stearns, and Lehman Brothers, were making money on the volumes of mortgage pools that they were securitizing$.$ This encouraged originators to issue more mortgages and increase the total value of the mortgages.

Mortgages were accessible for borrowers who did not meet income and minimum down payment requirements. Moreover, the Fed kept interest rates really low to prevent a recession. This led to a decrease in the demand for homes and a further decline in housing prices.