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 ?
In the current fiscal, this is the third successful loan securitization transaction for Home Credit India.
The special purpose corporation, to be known CBC Assets One (SPC), will hold the assets for securitization transactions of China Bank Capital.
[paragraph] These SFR rental securitization transactions are secured by the revenues generated from the rental income from the collateral properties as well as by their residual value.
trust--such as a securitization transaction where a trust sells
This is the third securitization transaction sponsored by Impact Community Capital LLC following its $40.3 million Impact Funding 2000-A LLC securitization and its $164.2 million Impact Funding 2001--A securitization.
(38) Although the specifics of a particular arrangement may vary depending on the parties involved, the basic features of a securitization transaction are the same.
From the perspective of a bank that participates in such a loan securitization transaction (or otherwise acquires loan-backed securities), it receives the same cash flows and is exposed to the same underlying risks with respect to those cash flows as if the bank held the loans directly.
The parties to a securitization transaction include:
For an extreme case, consider the credit-card receivable securitization transaction described earlier.
(NASDAQ: JACK) said on Monday that one of its indirect, limited-purpose subsidiaries (the master issuer) has completed the sale of USD1.3bn 2019 notes in a privately placed securitization transaction.
Education Loan Finance is the first student loan refinancing lender to receive the AAA rating from both Standard & Poor's and DBRS on its senior notes in its first securitization transaction comprised of this type of education loan product.