Securitization is a financial process that transforms illiquid assets like mortgages into securities by pooling many assets together and selling ownership shares to investors. For example, a mortgage-backed security represents ownership shares in a collection of mortgages. Securitization allows the original owners of the assets, such as banks, to gain liquidity and raise funds. A common type of asset used in securitization is mortgage loans, which are pooled and sold as mortgage-backed securities in the capital markets.

2. Securitization
• Securitization is the process of taking an illiquid
asset, or group of assets, and through financial
engineering, transforming them into a security.
• A typical example of securitization is a mortgage-
backed security (MBS), which is a type of asset-
backed security that is secured by a collection of
mortgages.

3. Securitization as a
Funding Mechanism
Securitization is the process whereby cash flow
producing assets (such as home loans, car loans
etc) are pooled together and the value of such
loans is packaged as securities which are then
sold to institutional investors in the capital
markets.

4. Whole Loans
Whole loan lenders
commonly sell their
whole loans in the
secondary mortgage
market to buyers

5. A mortgage loan is
a loan secured by real
property through the use of
a mortgage note which evidences the
existence of the loan and
the encumbrance of that realty
through the granting of
a mortgage which secures the loan.
However, the word mortgage alone, in
everyday usage, is most often used to
mean mortgage loan.
Mortgage

6. A graduated payment mortgage loan, often
referred to as GPM, is a mortgage with low
initial monthly payments which gradually
increase over a specified time frame.
Graduated
payment