1) After years of rising home prices, many Americans took out mortgages to purchase homes, often with adjustable rates and little verification of income or assets. 2) Banks sold these mortgages to investment banks, who bundled them into collateralized debt obligations (CDOs) and sold shares to other banks and investors. This removed the origination banks' responsibility if borrowers defaulted. 3) When home prices stopped rising and adjustable rates increased, many borrowers defaulted. This caused the value of CDOs to plummet, resulting in billions in losses for investment banks and contributing to the financial crisis.