Securitization can be broadly referred to the process of selling assets to generated cash flows. The assets are sold from the institutions that own them to other companies that have been set up for the purpose of issuing security notes. This usually results to bonds which are asset backed.
In securitization, the company holding assets first collects data and information on the assets that it would like to move from its balance sheets. The assets, which are now considered as reference portfolios are sold to an issuer who then creates securities that are then sold to investors who buy them at a specified rate of return.
The process of securitization creates liquidity as retail investors are able to purchase shares that would otherwise be unavailable to them. Securitization also reduces liability on the originators balance sheets and so they are able to underwrite any additional loans.
In securitization, the borrower approaches a bank or any financial institution for a loan .The institution or bank then allows for a certain sum as a debt in exchange for collateral. The originator or lender then sells off the receivables to the Special Purpose Vehicle (SPV). The SPV then transforms the receivables into securities that are then sold to investors who extend the loans to be able to receive a return on investment.
The analysis of the securitization process follows through the outlined steps to ensure that no fraudulent activities have occurred; these steps are outlined in the Pooling Servicing Agreement. The analysis may be done by a forensic auditor whose purpose is to follow the chain of the title to ensure that the process was done legally. The auditor may use the Bloomberg terminal to search for the securitized property for real time data. The auditor must also ensure the regulations under which the specified jurisdiction is followed. For a free consultation please go to
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