23-07-2012, 11:44 AM
Securitization
Securitization.ppt (Size: 262 KB / Downloads: 27)
Securitization is the process of taking an illiquid asset, or group of assets, and through financial engineering, transforming them into a security
NEED:
Enhancing liquidity ,attainment of capital adequacy ratio ,increasing operating finance
Sector target
Urban infrastructure
Power
Telecom
Roads and ports
Housing finance
Auto finance
Important roles
The Originator
Special purpose vehicle
Investors
Obligator
Rating Agency
Administrator
Agent and Trustee
Structure
process in securitization
Transfer of assets by the originator to trust through SPV
Assets must be homogenous in nature
Special purpose vehicle
Pass through certificates
Investor
Merchant banker
Trustee
Resources
Future rentals
Bills made
Future billings
Credit card receivables
Loans yet to be paid
Types of securitization
Asset Backed Securitization
Mortgage Backed Securitization
Mortgage-Backed Securities (MBSs)
Originated in response to mortgage funding shortfall
Mortgages are “securitized” by packaging mortgage loans and selling the cash flows as securities
The mortgage-backed securities represent ownership in the mortgages
Mortgages generally have an embedded option: to prepay the mortgage (in event of interest rates falling, mortgage-holder moving, etc.)