Debt Markets and Analysis, + Website

CHAPTER 10

Mortgage-Backed and Asset-Backed Securities and Securitization

Introduction

One of the most innovative developments to occur in the security markets over the last three decades has been the securitization of assets. Securitization involves creating a new security backed by a large number of assets (e.g., mortgages or accounts receivable) that have been grouped into a pool. A trustee, such as a financial institution or government agency, often holds the pool of assets that serve as the collateral for the new securities. The new securities are then sold to investors as asset-backed securities. The most common type of asset-backed security is a pass-through: a security that has the cash flows from the pool of assets pass through the ...