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Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans, or credit card debt obligations (or other non-debt assets which generate receivables) and selling their related cash flows to third party investors as securities, which may be described as bonds, pass-through securities, or collateralized debt ...
In the second case, an "asset-backed security" – or at least the abbreviation "ABS" – refers to just one of the subsets, one backed by consumer-backed products, and is distinct from a MBS or CDO, (example: "As a rule of thumb, securitization issues backed by mortgages are called MBS, and securitization issues backed by debt obligations are ...
Cash CDOs involve a portfolio of cash assets, such as loans, corporate bonds, asset-backed securities or mortgage-backed securities. Ownership of the assets is transferred to the legal entity (known as a special purpose vehicle) issuing the CDO's tranches. The risk of loss on the assets is divided among tranches in reverse order of seniority.
Pooling is the grouping together of assets, and related strategies for minimizing risk. For example: Asset-backed securities (ABS) is a security whose income payments are backed by a specified pool of underlying assets. Mortgage-backed securities (MBS) is a type of asset-backed security whereas the underlying assets are mortgages.
CMBS tend to be more complex and volatile than residential mortgage-backed securities due to the unique nature of the underlying property assets. [ 1 ] The typical structure for the securitization of commercial real estate loans is a real estate mortgage investment conduit (REMIC), a creation of the tax law that allows the trust to be a pass ...
Borrowing under a securitization structure. Credit enhancement is the improvement of the credit profile of a structured financial transaction or the methods used to improve the credit profiles of such products or transactions.
The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (also known as the SARFAESI Act) is an Indian law. It allows banks and other financial institutions to auction residential or commercial properties of defaulters to recover loans . [ 1 ]
However, collateral management has evolved rapidly in the last 15–20 years with increasing use of new technologies, competitive pressures in the institutional finance industry, and heightened counterparty risk from the wide use of derivatives, securitization of asset pools, and leverage.