Re:Likely a feature (Score 1)

A lot of the lenders didn't have the money needed to make the loans. They would make loans, package them and sell them and the money that they made from selling the loans would finance the next batch of loans that they were packaging.

Without a steady cash flow from selling mortgages, they can't make any new loans. So when companies stopped buying mortgage securities, their cash flow dried up and they couldn't make any more loans. Game over.

This actually happened to someone I know. They were purchasing a house and the bank who was financing their mortgage ran out of money.

They couldn't close that day and ended up having to find a new bank at the last minute to close a couple of days later. Everything ended up ok for them but I'm sure it was a more than a little stressful at the closing.