The idea is that if these different real-estate markets are already uncorrelated, then cutting them up and recombining them should make them super uncorrelated. If the house in Baltimore defaults, the equity tranche holders are wiped out, but that loss is isolated from the holders of the loans on the condominiums and the Upper East Side penthouses. Safety combined with greater returns (at least for those holding the risk) led to an explosion of demand for these securities as US housing prices nearly doubled between 1997 and 2008. They were no longer a simple equity hedge. They became objects of investors’ desire in their own right.

Mark Blyth, Austerity, loc. 91