plain

Q&A: What does securitizing an asset mean. Asset securitization? In plain english please. Thanks?

Posted on by

Question by ivette s: What does securitizing an asset mean. Asset securitization? In plain english please. Thanks?

Best answer:

Answer by puremonopoly
Financial cash-flow producing assets that are pooled together and sold to investors in packages. These asset packets don’t hold high yielding returns.

Sub-prime lenders use this technique when issuing a loan. They’ll secure the loan from many lenders that contribute partial amounts of money so as to lower the total risk of each lender, thereby allowing each lender to partially secure loans for more than one party. Its a form of risk management that didn’t do so well in the mortgage industry recently because of bad investment techniques.

Its advised to risk no more than 15% of your total assets in Asset Securitization if you do choose to go down that investment route.

What do you think? Answer below!

Share on Tumblr
Share on Myspace Share

What does this mean in plain English?

Posted on by admin

Question by sweetnsassy: What does this mean in plain English?
“Owing to a form of financial engineering called securitization, many mortgage lenders had passed the rights to the mortgage payments and related credit/default risk to third-party investors via mortgage-backed securities (MBS) and collateralized debt obligations (CDO). Corporate, individual and institutional investors holding MBS or CDO faced significant losses, as the value of the underlying mortgage assets declined. Stock markets in many countries declined significantly.”

Best answer:

Answer by bud68
It means mortgage lenders made reckless loans to unqualified buyers, packaged the loans into complex bond-like securities and peddled them to investors as “investment-grade” securities. These securities have now tanked.

Add your own answer in the comments!

Share on Tumblr
Share on Myspace Share