Question by Zoey Hockey: Econ: Securitization?
What role did securitization play in the recession.
Best answer:
Answer by Jim G
Secularization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations and selling said consolidated debt as bonds, pass-through securities, or Collateralized mortgage obligation (CMOs), to various investors. The principal and interest on the debt, underlying the security, is paid back to the various investors regularly. Securities backed by mortgage receivables are called mortgage-backed securities (MBS), while those backed by other types of receivables are asset-backed securities (ABS).
This is highly risky for all your available money to be tied up in times like this recession.
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