Overheated US housing prices started dropping in 2006. Homeowners were going underwater (they owed more than the house was worth) and many had questionable credit - “fog the mirror loans” were common, if you breathed you got a loan. *Banks sold these mortgages to agencies like Fannie Mae and Freddie Mac.
They bundled the mortgages with other loans bearing similar interest rates and then sold them as Mortgage-backed securities (MBS), so called because their value was backed or secured by the value of the underlying mortgages………………………………………..Full Article: Source