Securitization of Mortgage Debt, Domestic Lending, and International Risk Sharing

Securitization of mortgage debt is a good idea in principle because it makes risks internationally tradable that were hitherto local and non-diversifiable: housing. We show that U.S. sales of securitized mortgage debt actually helped global risk sharing when credit was abundant prior to the global financial crisis, but that this mechanism broke down when credit dried up during the global financial crisis.