Many investors found themselves trapped with securities that they couldn't sell. Bond prices and interest rates are inversely related. So when selling pressure puts downward pressure on bond prices interest rates rise. On some of the mortgage backed securities, the interest rate was 30%.
Inflation favors the debtor. But when housing prices were falling, debtors had to pay the interest and the debt tax that comes from a loss of purchasing power. This caused mortgage defaults. The resulting credit crunch caught many in a illiquidity trap.