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 ?
Some of these lenders have expressed an interest in finding alternative sources of funding, including securitizing the loans that they make.
Given the amount of innovation in the securitization market over the past several years, we do not believe that the hurdles to securitizing business and community development loans are insurmountable.
C-BASS, the established leader in servicing and securitizing credit sensitive residential mortgages, and an affiliate of MGIC Investment Corporation (NYSE:MTG), and Radian Group Inc.
Although only a recent phenomenon in Mexico, the concept of states and municipalities (also referred to as "subnationals") funding themselves by securitizing tax revenues received from the federal government has been heating up considerably, according to a commentary on the subject released recently by Standard & Poor's Ratings Services.
IndyMac Bank is a technology-based institution focused primarily on originating, purchasing, selling, securitizing, and servicing residential mortgage products.
is a nationwide mortgage banking institution with over 1,100 employees engaged in the business of originating, financing, selling, securitizing, and servicing residential mortgage loans which do not conform to the credit or other criteria established by Fannie Mae and Freddie Mac, commonly referred to as "nonconforming" or "non-prime" mortgage loans.
This is First Permanent's second RMBS transaction, the fifth Australian transaction securitizing high LTV loans, and the fourth transaction backed by loans to borrowers seeking finance to purchase new homes constructed by Devine.
15, 2002--The level of inquiry for alternative investments, a burgeoning sector of global collateralized debt obligations (CDO), has increased tremendously in 2002 as collateral managers begin recognizing the benefits and potential returns to be reaped by securitizing alternative assets, said Christopher Howley, a director in Standard & Poor's Structured Finance group in New York.
The Pullman Group,(R) LLC as principal, specializes in securitizing, financing and purchasing music publishing, writer's share, record masters, artist and record royalties, film and television libraries, TV syndication, literary estates and other entertainment royalties.
By securitizing all of the subordinated certificates residing in the Oscar series, Orico tapped overcollateralization residing in its earlier auto loan securitizations.
has been securitizing a portfolio of trade receivables against debtors located in 20 different countries through an Asset Backed Commercial Paper program issued by Rosy Blue International S.
C-BASS, the established leader in servicing and securitizing credit-sensitive residential mortgages, and an affiliate of MGIC (NYSE:MTG) and Radian Group Inc.