Final answer:
Lenders handle Mortgage Backed Securities (MBS) through a process called securitization. They sell their mortgages to financial companies, which create MBS and sell them to investors. This transfers the mortgage risks to the investors.
Step-by-step explanation:
Lenders handle Mortgage Backed Securities (MBS) through a process called securitization. They sell their mortgages to financial companies, which combine them into a pool and create MBS. These MBS are then sold to investors, allowing lenders to transfer the mortgage risks to the investors. Investors receive a steady stream of income from the mortgage payments made by borrowers. Credit agencies assess the credit risk associated with MBS, but in the 2008 financial crisis, the agencies were deemed too lenient in their ratings.