While housing prices were rising, subprime borrowers would typically refinance adjustable-rate mortgages into another similar mortgage as soon as the teaser rate period ended.

By securitizing subprime mortgages, banks created pools of assets that were mostly rated below investment-grade to sell to investors.

The growth in demand for subprime mortgage financing leading up to the crisis was fueled in part by high interest rates and a strong housing market.

Based on the originate-to-distribute (OTD) model for subprime mortgages, the bank that initiated the mortgage loans incurred all the losses on the loans.