Final answer:
Securitization is the process by which mortgages are bundled and sold as mortgage-backed securities to investors, thereby spreading the risk. This practice was partly responsible for the 2008-2009 financial crisis due to lenient credit ratings.
Step-by-step explanation:
The process being described is known as securitization. This is when lenders sell their mortgages to financial entities that combine these mortgages into a large pool. The financial entities then create financial securities, specifically mortgage-backed securities, which they sell to investors like pension funds. This allows lenders to off-load the risk associated with the mortgages to the investors. These securities seemed attractive to investors as they were expected to provide a steady stream of income based on the repayment of the underlying mortgages. However, problems arose when the credit rating agencies assigned lenient ratings to these securities, contributing to the 2008-2009 financial crisis.