Ironically mortgage bonds were invented to solve the opposite problem: mortgages getting paid off (when moving or refinancing). People tend to do those things w

Ironically mortgage bonds were invented to solve the opposite problem: mortgages getting paid off (when moving or refinancing). People tend to do those things when interest rates go down. Investors didn't want to buy a bond that paid low rates of return when interest rates were high (as most bonds do) and then might get repaid in full with no penalty when the rates lowered. The answer, of course, was to roll a bunch of mortgages together into a special purpose vehicle (SPV) then sell bonds to fund it, then divide those bonds into tranches such that the lower tiers got repaid in full when the refinancings started. Kind of hard to believe now that investors used to be worried about people paying their mortgages off too soon.