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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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.


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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved


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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.


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.

Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson


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.
Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005


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.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
References in periodicals archive ?
(2011) note the potential centrality of asymmetric information to the securitization process and conjecture that a securitizing sponsor can keep a junior (equity) tranche "as a signaling" device of its (unobservable) quality or as an expression of a commitment to continue monitoring.
Some of these lenders have expressed an interest in finding alternative sources of funding, including securitizing the loans that they make.
Seeking to offer a new mortgage product while catering to the growing demographic of aging homeowners, the Government National Mortgage Association (Ginnie Mae) announced it will begin securitizing reverse mortgages.
In just over three months, we have fulfilled our promise to stockholders by securitizing more than $2.4 billion of self-originated ARM loans."
Implicit recourse is of supervisory concern because it demonstrates that the securitizing institution is re-assuming risk associated with the securitized asset that the institution initially transferred to the marketplace.
The Bank has expertise in originating, financing, structuring, securitizing and trading commercial real estate debt.
In additions, banks' success in securitizing consumer debt instruments for resale in capital markets has increased both their willingness and their ability to make such loans.
The momentum that is building in the market for securitized commercial mortgages stems, in large measure, from four key developments: ratings, credit enhancement techniques, interest rate swaps and the availability of alternative structures for securitizing pools of commercial mortgages.
The company took top honors as Freddie Mac's number one Program Plus producer in 2002, securitizing two transactions totaling $1.86 billion.
We believe that rather than specifying detailed capital requirements for a select group of assets by statute, it would be preferable for the Congress to revise this legislation to support the agencies' efforts to develop appropriate capital standards for securitizing all types of loans.