SECURITIZATION- Concept

Securitization is the process of conversion of

receivables and cash flow generated from a pool of
financial assets such as mortgage loans, auto loans,
credit card receivables and other assets into securities
that are backed by these assets.
In other words, securitization is the process of pooling
of homogenous, illiquid assets and issuing claims on
those assets in the form of marketable securities.
The idea of securitization is to create a capital market
product. It results in the creation of a "security", which
is a marketable product.
The idea of securitization is to create a capital
market product. It results in the creation of a
"security", which is a marketable product.

Securities backed by mortgage receivables are

called mortgage-backed securities, while those
backed by other types of receivables are called
asset-backed securities.
Secutitization Process
 The process Involves:

• undertaking “due diligence” on the quality and future

prospects of the assets;
• setting up the SPV and then effecting the transfer of
assets to it;
• underwriting of loans for credit quality and servicing;
• accordance to originator and investor requirements;
• the notes being rated by one or more credit rating
agencies;
• placing of notes in the capital markets.
 Asset Backed Securities (ABS)

Asset backed Securities are the most general

class of securitization transactions.

The asset in question could vary from Auto

Loan/Lease/Hire Purchase, Credit Card,
Consumer Loan, student loan, healthcare
receivables and ticket receivables to even
future asset receivables.