The document discusses asset-backed securitization, including: 1) Asset-backed securities derive their value from pools of underlying assets like loans or receivables, and are issued by special purpose vehicles (SPVs). 2) SPVs are entities created specifically for securitization and have strict characteristics like bankruptcy remoteness. 3) The US mortgage market is highly developed, with originators like banks securitizing mortgages through government-sponsored entities like Fannie Mae and Freddie Mac or private conduits. 4) Pakistani law establishes an regulatory framework for securitization, including registration of SPVs, eligibility criteria for promoters/directors, and obligations of SPVs in operating asset-backed programs.

1. Asset Backed Securitization
Presenters
Ayesha Majid
Muhammad Ameen Abdullah
Muhammad Bilal Sarwar
Sana Shauqat

2. Agenda

3. Asset Backed Security
An Asset-backed security is a financial security whose
value and income payments are derived from and
collateralized by a specific pool of underlying assets.

4. Financial Security
A fungible, negotiable instrument representing financial value
and includes;

6. Structure of Asset-Backed Securities
High Credit rating
Normally AAA
Rating
Low yield due to
higher rating
Low rating
compared to
Class A
High Yield due to
Lower rating
Lowest or no
Rating
Usually retained
By issuer or
Sponsor
Highest return

7. Principal payment structures of ABS

8. Types of ABS according to principal payment method

9. Key Features of an Ideal Asset-Backed Instrument

10. ASSET_BACKED SECURITIZATION
PARTIES AND PROCESS

11. Parties in Securitization

12. Originator

13. Special Purpose Vehicle
A special purpose vehicle is a legal entity created to fulfill
a narrow or specific or temporary objects.

14. Characteristics of Special Purpose Vehicle (SPV)

15. Uses of SPV

16. Key features in a desired SPV

17. Underwriter

18. Credit enhancers
• Over collateralization
• Subordination

19. Dealer

20. Benefits of Securitization

21. Credit enhancement Providing services
Sale of securitized
receivables
Notional Principle of
Bonds
Fixed rate Coupon
Payments

22. The US secondary mortgages market
• The US secondary mortgages market is
considered to be the world’s most developed
mortgage securitisation market.

23. • The mortgage originators are commercial banks,
thrifts, mortgage banks, and mortgage brokers.
• The main secondary market conduits are Fannie
Mae, Ginnie Mae and Freddie Mae.
• Some private investment banks also act as
conduits in the secondary mortgages market, but
to a limited extent.
• The investors in the secondary mortgages market
are the pension funds, the life insurance
companies, the commercial banks, the thrifts,
and Fannie Mae.

24. INSTITUTION FRAMEWORK FOR THE SECONDARY
MORTGAGES MARKET IN THE US
• The housing and mortgages industry in US is
overseen by U.S. Department of Housing and
Urban Development (HUD).
• It also sets goals for government owned
Ginnie Mae, and Government Sponsored
Enterprises (GSE) like Fannie Mae and Freddie
Mac.

25. • The Secretary of HUD is the mission regulator
for Fannie Mae and Freddie Mac with
oversight authority to ensure that both GSEs
comply with the public purposes set forth in
their charters.
• The secretary is charged with the general
regulatory authority over GSEs in all areas
other than the GSEs financial safety and
soundness.

26. • The financial safety and soundness of GSEs is
regulated by an independent office of HUD,
the Office of Federal Housing Enterprise
Oversight (OFHEO).
• It regulates both the GSEs for safety and
soundness, by ensuring that they are
adequately capitalized and operating their
businesses in a financially sound manner.

28. Short title and commencement

29. Definitions
Commission means securities and exchange
commission
Commission
Includes all such receivables against which
income may accrue at a future date
Future receivable

31. Investor is a person holding any asset backed
securities issued by special purpose vehicle
Means document containing information on a
security calculated to invite offers
Investor
Offering document

32. Ordinance
Ordinance means Companies Ordinance 1984
A person transferring Future receivables to
a Special Purpose Vehicle
Originator

33. A process whereby a SPV issues TFCs or other
instruments to make payment to originator
and own the title of future receivables
Means a SPV registered by the commission for
the purpose of Securitization
Securitization
Special Purpose Vehicle

34. Eligibility for Registration

35. Eligibility for Registration
No director, officer or employee of such person has been

36. Eligibility for Registration
Promoters, Directors and Trustees, in opinion of Commissioner are;

37. Registration

38. Cancellation of registration

39. Conditions of Operation
No SPV shall ;

40. Obligations of SPV

41. Advertisement and Invitation