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Securitization is the process of transferring loans to third parties through the issuance of debt whose cash-flows are collateralized by the original loan pool. 1 A loan sale is the transfer of loans in whole without any future involvement by the transferor. Both loan sales and securitizations provide similar benefits.
Securitization allows the original lender or creditor to remove assets from its balance sheets to underwrite additional loans. Investors profit as they earn a rate of return based on the associated principal and interest payments made on the underlying loans and obligations by the debtors or borrowers.
Whole loans are an alternative to securitization, which is when a financial institution pools multiple loans and issues a security backed by these loans, known as a mortgage-backed security (MBS). These then are broken up and resold to investors. Whole loans are not broken up; hence, the name.
A loan sale is a sale, often by a bank, under contract of all or part of the cash stream from a specific loan, thereby removing the loan from the banks balance sheet.
Two elements of that reform program (and there were several more) were the Securities and Exchange Commission (SEC) which regulates the sale of stocks and securities and the Federal Deposit Insurance Corporation (FDIC) which created an insurance fund, financed by premiums paid by Federal banks and administered by the
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Asset securitization is the structured process whereby interests in loans and other receivables are packaged, underwritten, and sold in the form of asset- backed securities.
There are three most common types of securitisations from the perspective of cash flow: Collateralized Debt, Pass-Through and Pay-Trough structures. Collateralized debt is the form most similar to traditional asset-based borrowing.
Securitization is the process in which certain types of assets are pooled so that they can be repackaged into interest-bearing securities. The interest and principal payments from the assets are passed through to the purchasers of the securities.