Question

Why did mortgage backed securities wind up being a terrible investment for many americans?

Answer 1

Mortgage backed securities were a bad investment during the great financial crisis. Most of the time these are considered safe investments. They were given the wrong credit rating prior to the financial crisis. Therefore, they were a risky investment at the time of the crisis and people lost lots of money.

Answer 2

Mortgage in its very essence is buying something with the use of other's people money and paying it back over a certain period of time with interest. In any setting people who can't afford something and would want to buy something either for luxury, business or whatever purpose they may use it would opt to go for mortgage. They would use either their house, car, and/or even the item they bought as a collateral in order for the bank to pay them money. Having this system makes people complacent since what they could do is to simply mortgage something so that they can buy another something. This ends in a never ending series of mortgages and increasing number of liabilities. What happens is that when their money from their work or business arrives instead of using it to provide for their basic needs and wants, they instead use it to pay for their mortgages and basic needs no longer including their wants.