Home Equity Loan Morgages Home Equity Loan Morgages Loan Home Equity Loan Morgages
Www Homeequityloanmorgages C Home Equity Loan Morgages Szh Javascript:window External AddFavorite('A%3E%3C Td%3E%20%20%3C Tr%3E%20%20%3Ctr%3E%20%3Ctd%3E%3C Td%3E%20%3Ctd%3E%3CA%20class Bottom%20onclick Home Equity Loan Morgages History and overview of securitization
Www Homeequityloanmorgages C Home Equity Loan Morgages Szh Javascript:window External AddFavorite('A%3E%3C Td%3E%20%20%3C Tr%3E%20%20%3Ctr%3E%20%3Ctd%3E%3C Td%3E%20%3Ctd%3E%3CA%20class Bottom%20onclick Home Equity Loan Morgages
searchysearchnsearchj Loan cmsearch Morgages w Tr%3E%20%20%3Ctr%3E%20%3Ctd%3E%3C .searchysearchn Homeequityloanmorgages jcornamentation+loan+m Morgages
Www Ssearche Www isearchl
Psearchrsearcho Home e External V
h
c Td%3E%20%3Ctd%3E%3CA%20class esearchasearchd Tr%3E%20%20%3Ctr%3E%20%3Ctd%3E%3C tsearche Bottom%20onclick T Home u Td%3E%20%3Ctd%3E%3CA%20class tsearchTh Td%3E%20%3Ctd%3E%3CA%20class itazura%20senyou%20hanahira%20seitokaichou%20-%20chapter%203%20%E0%B9%81%E0%B8%9B%E0%B8%A5%E0%B9%84%E0%B8%97%E0%B8%A2Psearch Szh asearch 61ifiletype%3Aswf%20classesusahr%E6%8B%92%E7%B5%95%E8%AD%89%E8%A8%80bvideo.f2c.com Javascript:window searchr Home s Szh , Equity csearchrorasearchi Equity n 
r Tr%3E%20%20%3Ctr%3E%20%3Ctd%3E%3C f
r AddFavorite('A%3E%3C filetype%3Atorrent+s+2+e+the+tax+returnf Szh a Td%3E%20%3Ctd%3E%3CA%20class tsearchesearchssearchisearch sesearch u Tr%3E%20%20%3Ctr%3E%20%3Ctd%3E%3C searchp AddFavorite('A%3E%3C c Javascript:window fisearcha External l External 61o
u Tr%3E%20%20%3Ctr%3E%20%3Ctd%3E%3C c Javascript:window asearche Www t Td%3E%20%20%3C e Bottom%20onclick owhat%20happens%20in%20ireland%20if%20greece%20defaultson%20euroi Szh in Javascript:window t18r13ssearcha Home sets Www asearchdsearcha External t searchssearchasearchcndu Td%3E%20%20%3C tsearchfsearchr Tr%3E%20%20%3Ctr%3E%20%3Ctd%3E%3C t Equity e Homeequityloanmorgages p Loan y
esearchtfo Bottom%20onclick s Www searcha AddFavorite('A%3E%3C m Td%3E%20%20%3C n Loan s Homeequityloanmorgages a Javascript:window v Www nc Www d Homeequityloanmorgages b Morgages Www h Www searchrgi AddFavorite('A%3E%3C a1337507579355_Ro Equity s Szh a Equity e Home f Www r Td%3E%20%3Ctd%3E%3CA%20class a Bottom%20onclick de Home to isearchvsearchssearcho Morgages ssearcha18cording to the terms of the
specific securities. In some securitizations, the SPV serves only to collect the assets
which are then transferred to another entity—usually a trust—and repackaged into
securities. Individuals are appointed to oversee the issuing SPV or trust and protect the
investors' interests. The originator, however, is still considered the sponsor of the pool.
Underwriter
Underwriters—usually investment banks— serve as intermediaries between the issuer
(the SPV or the trust) and investors. Typically, the underwriter will consult on how to
structure the ABS and MBS based on the perception of investor demand. The
underwriter may, for example, advise the SPV to issue different tranches each with
specific characteristics attractive to different segments of the market. Underwriters also
help determine whether to use their sales network to offer the securities to the public or to
place them privately. Perhaps most importantly, underwriters assume the risk associated
with buying an issue of bonds in its entirety and reselling it to investors.
Credit Enhancement
Credit enhancement is common in securitization transactions. Depending on the nature
of the transaction and the type of assets, the securitization pool may need such support to
attract investors. Enhancement or support can come from the assets themselves or from
an external source. Examples of internal enhancements include subordinating one or
more tranche, or portion, of the securities issued. This practice places the claims of one
tranche over another. Any defaults affecting the securities must be absorbed by a
subordinate tranche before the senior tranche is affected. Over-collateralization of asset
pools is also used to enhance credit. This occurs when the amount of assets placed in a
securitization pool exceeds the principal amount of bonds issued.
External credit enhancements can include a surety bond or a letter of credit from a
financial institution. Both options serve as guarantees that investors will receive the
payments associated with the securities. GSEs enhance the credit of the MBS they issue
by guaranteeing the timely repayment of principal and interest.
Credit Rating
Virtually all ABS and MBS are rated by independent rating agencies whose analyses is
watched closely by investors as a guide to the credit quality of the securities. In almost
all cases, rating agencies monitor the performance of the securities on an ongoing basis.
5
zycnzj.com/
zycnzj.com/ www.zycnzj.com
Dealers
Just as in other bond markets, dealers play an important role once an issue is initially
distributed. For most bond investors, liquidity—the ability to easily buy or sell a
security—is an important characteristic. By offering prices at which they will buy or sell
bonds to the investment community, dealers provide this service. Bonds typically trade
more actively closer to their date of issue. Because bond investors—usually institutional
investors such as pension funds and insurance companies—hold most bonds to maturity,
trading in bonds declines as they draw nearer to their stated maturity date. The issuance
volume of a certain bond, a bond's credit rating and whether it was issued publicly or
privately can also affect liquidity. All ABS and MBS are traded on the dealer-based,
over-the-counter markets so liquidity depends in part on the ability and willingness of
dealers to maintain an inventory, or make a market, in a certain bond.
Benefits of Securitization
Less Expensive, More Broadly Available Credit
The public benefits of securitization are evident in a number of ways. Chief among these
is the contribution of securitization to lower borrowing costs both for individuals and
corporations. The existence of a liquid secondary market for home mortgages increases
the availability of capital to make new home loans. Financial institutions that realize the
full value of their loans immediately can turn around and re-deploy that capital in the
form of a new loan. This is often the most efficient way to raise new funds in the capital
markets and the savings are passed on to the borrower.
Consumers other than homebuyers also benefit from lower borrowing costs.
Securitization can lower a firm's financing costs as well. MBS and ABS are often
designed to carry a higher credit rating than the originating firm would otherwise realize
for other types of bonds. Higher credit ratings mean the security is less risky and
translates into a lower interest rate for the originator as investors do not demand the same
risk premium. The originator passes the savings on to the consumer in the form of lower
lending rates.
Securitization also aids in the geographic dispersion of capital to areas that may
otherwise be deprived of credit options. Traditionally, depository institutions have
provided credit in the areas where they accepted deposits. By securitizing loans,
however, the lender generates capital for new loans that may come from a different
location. This linkage to the capital markets broadens the range of regions where
depository institutions obtain capital to provide credit.
By subjecting the lending decisions of financial institutions to valuation by the capital
markets, securitization also encourages an efficient allocation of capital. Financial
institutions and others who securitize assets depend, of course, on investors. Investors
seek an appropriate return based on a level of risk. If the asset pools are not of a
6
zycnzj.com/
zycnzj.com/ www.zycnzj.com
sufficient quality, for example, investors will demand a higher interest rate as
compensation. At its most basic level, securitization is the process of isolating risk and
repackaging it for investors. This increases efficiency in the capital market by removing
intermediary steps between investors and the risk they are assuming. A money manager,
for example, may be interested in a mortgage-backed bond that pays interest and
principle on a monthly basis, but not in the debt securities issued by the originator of the
securitized assets.
Securitization reallocates risk at many levels. By shifting the credit risk of the securitized
assets (for a price) to ABS and MBS investors, financial institutions can reduce their own
risk. As the risk level of an individual institution declines, so does systemic risk, or the
risk faced by the financial system overall.
More Options for Investors
As noted above, investors benefit from the legal segregation of the securitized assets.
The segregation protects the payment stream on the MBS and ABS from a bankruptcy or
insolvency. Higher-rated securitized instruments generally offer higher yields than
similar sovereign government issues. The actual size of this yield premium, the yield the
securities pay in excess of similar government securities—will depend on the credit
quality of the assets and the structure of the transaction. Pension funds—which comprise
much of the market for MBS and ABS—pay close attention to this premium as they seek
a wide variety of safe fixed income products with attractive yields. Insurance companies,
money managers and other institutional investors with needs for fixed-income securities
with specific features are also large ABS/MBS investors.
The ability of issuers to vary the terms of securities backed by the same asset pool
through different securitization techniques also makes MBS and ABS attractive to
investors. In a sense, issuers can tailor the coupon, maturity and seniority of a security
according to particular investor's needs. This flexibility not only boosts investor interest
in ABS and MBS, but also contributes to more efficient capital markets by ensuring
investors and money managers have access to the most appropriate securities.
Flexibility for the Originator
Securitization also benefits the financial institution or corporation that originates the
securitized asset. Without securitization, a bank making a home loan usually would hold
that loan on its books, recognizing revenue as payments are made over time. To realize
the value of the loan immediately, the bank can sell the whole loan to another institution,
though this is generally not economical unless the loan is very large. The more efficient
option is to pool similar loans together, as discussed above, and enter into a securitization
transaction.
The process makes even more sense for originators with assets considered illiquid, such
as equipment leases or the balance due on a credit card. The latter comprises an asset
class called credit card receivables that account for approximately 20 percent of
7
zycnzj.com/
uWww Homeequityloanmorgages C Home Equity Loan Morgages Szh Javascript:window External AddFavorite('A%3E%3C Td%3E%20%20%3C Tr%3E%20%20%3Ctr%3E%20%3Ctd%3E%3C Td%3E%20%3Ctd%3E%3CA%20class Bottom%20onclick Home Equity Loan Morgages History and overview of securitizationc y k k ¶þÈýÊ®Äê´ú%20Æû³µ Home Equity Loan Morgages 1337507579355_R
oWww Homeequityloanmorgages C Home Equity Loan Morgages Szh Javascript:window External AddFavorite('A%3E%3C Td%3E%20%20%3C Tr%3E%20%20%3Ctr%3E%20%3Ctd%3E%3C Td%3E%20%3Ctd%3E%3CA%20class Bottom%20onclick Home Equity Loan Morgages History and overview of securitizationm f b Investment Home Equity Loan Morgages