A high volume of loans issued to those who were unable to repay them, and a high volume of derivative securities traded on top of these loans, contributed to the subprime meltdown of 2007-2009.

A large amount of collateralized mortgage obligations (CMOs) and other collateralized debt were owned by large institutions and investors as alternative high yield investments prior to the crash of 2007-2009.

The lending environment leading up to the crash created an enormous pool of subprime mortgages with increasingly low standards for acceptance in a very competitive low rate environment.

Fannie Mae and Freddie Mac were buying up debt pools and guaranteeing CMO investments, and the largest investment banks in the country held large inventories of these high-risk securities.

When the everyday Americans who had been issued the subprime mortgage loans began to default in 2007, it began a cascade of defaults and insolvencies in the financial industry, in what became known as the Subprime Meltdown.