The basic process of securitization involves an originator assigning the cash flows from its assets or receivables to a special purpose vehicle (SPV). The SPV then issues securities backed by these cash flows to investors. The SPV collects payments from the obligors and uses the proceeds to pay investors in accordance with the priority of payment. Any excess cash flows are passed back to the originator as a residual profit.

1. Basic process of securitisation
10. Originator’s
residuary
profit
Originator
1. Cash flow before
securitisation
Obligors
2.Assigns
Cash flow
Security
trustee
4. Proceeds
of sale of
receivables
SPV
special
purpose
entity
3. Issues
securities/ notes
6.Passes over to SPV,
less fees
5.Collection and servicing
8. Reinvestment
proceeds/liquidity
facility
Reinvestment
4. Proceeds of
issue of securities
9. Payments to investors
Investors
Class A
Class B
Class C
7. Reinvestment/liquidity
buffer
1