The CRA played no significant role in expanding the subprime mortgage sector. This is a myth. Most subprime lending is ineligible for CRA credit and the vast majority of CRA loans are prime loans https://www.federalreserve.gov/images/20081203_analysis.pdf
The precipitating factor was a high default rate in the United States [[Subprime lending|subprime]] home mortgage sector. The expansion of this sector was encouraged by the following factors.
* Low interest rates.
* Many of these subprime (high risk) loans were bundled and sold, finally accruing to quasi-government agencies ([[Fannie Mae]] and [[Freddie Mac]]).<ref>https://object.cato.org/sites/cato.org/files/pubs/pdf/bp120.pdf</ref> The implicit guarantee by the US federal government created a [[moral hazard]] and contributed to a glut of risky lending.
* Securitization. Many mortgages were bundled together and formed into new financial instruments called [[mortgage-backed securities]], which could be sold as (ostensibly) low-risk securities partly because they were often backed by [[credit default swaps]] insurance.<ref>https://fisher.osu.edu/supplements/10/10402/credit-default-swaps-and-the-credit-crisis.pdf</ref> Because mortgage lenders could pass these mortgages (and the associated risks) on in this way, they could and did adopt loose underwriting criteria (due in part to outdated and lax regulation).