The process of creating collateralized debt obligations (CDOs) involved forming a diversified portfolio of cash-flow generating assets. These assets could include a variety of financial instruments such as mortgages, corporate bonds, and different types of loans. The next step in the process was to pool these assets together. This pooling created a large asset pool that could then be divided or 'tranched' into discrete sections. Each tranche represented a different level of risk and return, allowing investors to choose the tranche that best matched their risk tolerance and investment objectives. The tranches were then sold to investors, effectively moving the risk of the underlying assets off the bank's balance sheet and onto the investors who purchased the tranches. This process played a significant role in the build-up to the 2007-2008 financial crisis as the underlying quality of the assets in the CDOs was often poorly understood or misrepresented.

Choice B is incorrect. While this choice does mention the pooling and repackaging of cash-generating assets, it fails to mention the crucial step of forming a diversified portfolio. This diversification is key in spreading risk and making the CDOs more attractive to investors.

Choice C is incorrect. This choice incorrectly specifies that only mortgage products were used in the creation of CDOs. In reality, a variety of cash-flow generating assets were used, not just mortgages.

Choice D is incorrect. Similar to Choice C, this option incorrectly implies that only mortgages were used in creating these financial instruments. Additionally, it inaccurately suggests that there are always three tranches created from the asset pool which isn't necessarily true as the number can vary based on several factors.