securitization

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Securitization

Creating a more or less standard investment instrument such as the mortgage pass-through security, by pooling assets to back the instrument. Also refers to the replacement of nonmarketable loans and/or cash flows provided by financial intermediaries with negotiable securities issued in the public capital markets.

Securitization

The process by which a company packages its illiquid assets as a security. For example, when a company makes an initial public offering, it effectively packages the company's ownership into a certain number of stock certificates. Securities are backed by an asset, such as equity, or debt, such as a portion of a mortgage. Securitization allows a company access to greater funding to expand its operations or investments, or some other reason.

Securitization.

Securitization is the process of pooling various types of debt -- mortgages, car loans, or credit card debt, for example -- and packaging that debt as bonds, pass-through securities, or collateralized mortgage obligations (CMOs), which are sold to investors.

The principal and interest on the debt underlying the security is paid to the investors on a regular basis, though the method varies based on the type of security. Debts backed by mortgages are known as mortgage-backed securities, while those backed by other types of loans are known as asset-backed securities.

securitization

an arrangement which involves putting together a claim on particular assets of a business which is then sold as a negotiable security in the financial markets. Securitization is mainly undertaken by financial institutions; assets involved typically include commercial paper, mortgages, car loans, export credits and credit card receivables.

Securitization enables the issuing institution to raise ready cash, thus improving its liquidity. Purchasers of such securities seek to profit by obtaining claims on assets at less than their redemption value, but they may choose to on-sell their claims in the market.

securitization

a financial technique for raising loan capital that involves a firm issuing a CORPORATE BOND backed by certain specified assets owned by the firm. The interest charges on the bond and the eventual repayment of the bond itself are met by the income streams earned by the underlying assets, while the capital sum raised by the bond can be invested in other areas of the firm's activities. The alternative way to release the capital represented by the underlying assets would be to sell them off or to DEMERGE them into a separate business.

securitization

The process of taking many individual assets and combining them into a group,or pool,so that investors may buy interests in the pool rather than in the individual assets.The creation of collateralized mortgage backed securities is one example.The process increases the number of possible investors due to the ability to sell shares in the pool at relatively modest prices.In addition, because of the high degree of predictability inherent in large groups of things, the process of securitization increases predictability,lowers risk,and therefore increases value.

Example: On a single flip of a coin, how much would you bet that the coin would land heads up? On 20,000 flips of a coin, how much would you bet that it would land heads up fifty percent of the time, give or take two percent? This is a fundamental concept of securitization.

References in periodicals archive ?
This Statement applies prospectively in fiscal years beginning after December 15, 1995, to transactions in which a mortgage banking enterprise sells or securitizes mortgage loans with servicing rights retained and to impairment evaluations of all amounts capitalized as mortgage servicing rights, including those purchased before the adoption of this Statement.
If the mortgage banking enterprise sells or securitizes the loans and retains the mortgage servicing rights, the enterprise should allocate the total cost of the mortgage loans to the mortgage servicing rights and the loans (without the mortgage servicing rights) based on their relative fair values if it is practicable to estimate those fair values.
If the mortgage banking enterprise sells or securitizes the loans and retains the mortgage servicing rights, the enterprise shall allocate the total cost of the mortgage loans (the recorded investment in the mortgage loans including net deferred loan fees or costs and any purchase premium or discount) to the mortgage servicing rights and the loans (without the mortgage servicing rights) based on their relative fair values if it is practicable to estimate those fair values (refer to paragraph 18) as follows:
A mortgage banking enterprise that does not have a definitive plan at the purchase or origination date and later sells or securitizes the mortgage loans and retains the mortgage servicing rights shall allocate the amortized cost of the mortgage loans as described in paragraph 16(a) based on the relative fair values at the date of sale or securitization.
The provisions of this Statement shall be applied prospectively in fiscal years beginning after December 15, 1995, to transactions in which a mortgage banking enterprise sells or securitizes mortgage loans with servicing rights retained and to impairment evaluations of all amounts capitalized as mortgage servicing rights, including those purchased before the adoption of this Statement.
BancCap was formed in 2004 and provides subprime and Alt-A mortgage originators a program through which to securitize loans.
Such statements are based on current expectations, and the actual results and the timing of certain events could differ materially from those projected in or contemplated by these forward-looking statements due to a number of factors, including but not limited to financial market conditions, interest rate volatility and the level of interest rates generally; general political and economic conditions; the sustainability of loan origination volumes; the availability of financing for the origination of mortgage loans; the ability to sell or securitize mortgage loans; and other risk factors outlined in Accredited Mortgage Loan REIT Trust's 2004 annual report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on March 31, 2005, Accredited Home Lenders Holding Co.
Delta Financial Corporation (AMEX:DFC), a specialty consumer finance company that originates, securitizes and sells non-conforming mortgage loans, today announced that it redeemed all of its outstanding Series A 10% Preferred Stock at par on June 14, 2004, as previously announced on April 23, 2004.
Delta Financial Corporation (Amex: DFC), a specialty consumer finance company that originates, securitizes and sells non-conforming mortgage loans, today announced that it plans to redeem all of its outstanding Series A 10% Preferred Stock at par on June 14, 2004.
Delta Financial Corporation (Amex: DFC), a specialty consumer finance company that originates, securitizes and sells non-conforming mortgage loans, today announced it will be reporting its fourth quarter and full year 2003 financial results on Tuesday, March 9, 2004.
Delta Financial Corporation (Amex: DFC), a specialty consumer finance company that originates, securitizes and sells non-conforming mortgage loans announced that Hugh Miller, President and Chief Executive Officer, and Richard Blass, Executive Vice President and Chief Financial Officer, will address participants at the Friedman Billings Ramsey 10th Annual Investor Conference on Tuesday December 2, 2003 at 3:30 PM EST.
Additionally, Standard & Poor's noted that, "The company's dynamic proprietary due diligence and default software applications are especially noteworthy, as Litton purchases and securitizes mainly distressed assets.