Time mag. has a good explanation: "Many financial institutions wrote claims over the same mortgages, and these are the majority of claims that have "gone bad."
"Let Risk-Taking Financial Institutions Fail"
"At this point, such claims have no bearing on the mortgage or housing crisis; they have bearing only on the holders of these securities themselves. These are ridiculously risky claims with little value for society. It is as if many financial institutions sold "earthquake insurance" on the same house: when the quake hits, all these claims become close to worthless — but the claims are simply bets disconnected from reality."