Your understanding of how mortgage-backed securities work is flawed. MBS holders have no control over how the collateral backing their securities (the houses th

Your understanding of how mortgage-backed securities work is flawed. MBS holders have no control over how the collateral backing their securities (the houses themselves) are dealt with in a default. The servicers of the MBS are responsible for this. In other words, no investor buys MBS with the expectation of owning houses because that's simply not what happens. Out of all the "victims" in the housing collapse, MBS investors were arguably some of the more sympathetic. They were the true bag holders, overpaying (in the form of lower yields than was justified by actual risk) for lead that credit ratings agencies assured them was gold. Following the collapse, many any of them sued, alleging amongst other things, fraud. On the list of "victims", many but certainly not all borrowers were less sympathetic characters. Some individuals had no problem lying about their income, and many others took out adjustable rate mortgages with the incorrect assumption that they'd be able to flip their homes at a profit or rent them out when their payments increased. It's hard to see these folks as anything other than willing participants in the game.