From Economist Mark Zandi's January 2010 testimony to the <a href="https://en.wikipedia.org/wiki/Financial_Crisis_Inquiry_Commission" class="extiw" title="en:Financial Crisis Inquiry Commission">Financial Crisis Inquiry Commission</a>:
<p>"The securitization markets also remain impaired, as investors anticipate more loan losses. Investors are also uncertain about coming legal and accounting rule changes and regulatory reforms. Private bond issuance of residential and commercial <a href="https://en.wikipedia.org/wiki/mortgage-backed_securities" class="extiw" title="en:mortgage-backed securities">mortgage-backed securities</a>, <a href="https://en.wikipedia.org/wiki/asset-backed_securities" class="extiw" title="en:asset-backed securities">asset-backed securities</a>, and <a href="https://en.wikipedia.org/wiki/collateralized_debt_obligations" class="extiw" title="en:collateralized debt obligations">CDOs</a> peaked in 2006 at close to $2 trillion...In 2009, private issuance was less than $150 billion, and almost all of it was asset-backed issuance supported by the Federal Reserve's TALF program to aid credit card, auto and small-business lenders. Issuance of residential and commercial mortgage-backed securities and CDOs remains dormant."<sup id="cite_ref-1" class="reference"><a href="#cite_note-1">[1]</a></sup>
Banks and other financial institutions packaged various types of loans (including mortgages) into securities and sold them to global investors. This is called <a href="https://en.wikipedia.org/wiki/securitization" class="extiw" title="en:securitization">securitization</a>. In exchange for purchasing the investment, the investor receives a right to the cash flows from the underlying loans specified for the security. The chart shows how this financing source dried-up, meaning that non-prime mortgages and other types of loans could not be originated and sold to investors.
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<div class="reflist" style="list-style-type: decimal;">
<ol class="references"><li id="cite_note-1"><span class="mw-cite-backlink"><a href="#cite_ref-1">↑</a></span> <span class="reference-text"><a rel="nofollow" class="external text" href="https://www.fcic.gov/hearings/pdfs/2010-0113-Zandi.pdf">Testimony of Mark Zandi to Financial Crisis Inquiry Commission-January 2010</a></span>
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Financial Crisis Inquiry Commission
2012-03-15
<a rel="nofollow" class="external free" href="http://www.economy.com/mark-zandi/documents/FCIC-Zandi-011310.pdf">http://www.economy.com/mark-zandi/documents/FCIC-Zandi-011310.pdf</a>