FINANCIAL CRISIS OF 2008United States. It is important to appreciate how this problem started so as to see where the financial sector eventually found itself in the beginning of 2008. Ordinarily, the arrangement for a mortgage is that one approaches a lender for a loan, and the house funded is held by the lender a security. In this way, the lender is covered in the event of a default. Securities were also fashioned from the mortgages and sold in the stock market. Hence, investors could make money through a rise in prices, and their investments were safe (Amadeo, 2017). This was referred to as mortgage backed securities (MBS). Additional safeguards were inbuilt in the process of securing mortgages and this includedrequirement that the borrower pays a down payment, normally of between 3 and 20 percent, or gives a private mortgage insurance to insure the expected payments (Thakor, 2015). Then the lender does due diligence, which involved verifying employment status and income to ensure that the borrower was in a position to meet repayment requirements(Thakor, 2015). The structure of the mortgages therefore meant that default rates were low. Incidentally, a huge number of citizens were locked out of home ownership because they could neither afford down payment nor show proof of regular income sufficient to cover mortgage repayments (Amadeo, 2017).