Mortgage-Backed and Asset-Backed Securities and Securitization
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 ...