as I understand it, on a very simple level it worked like this: the banks needed a way to mitigate risk, so they bundled the mortgages. Soon the bundles became a product and started pulling in more and more mortgages. The real estate industry became a giant factory for churning out these asset back securities. And for a brief time, they were “as good as money.”
However, they were never really as good as money, because the underlying asset was nothing more substantial than promises to pay made by people who couldn’t keep those promises.