Securitization is the process of converting receivables from financial assets like mortgage loans into marketable securities. It involves packaging loans and receivables into asset-backed securities (ABS), collateralized debt obligations (CDO), and mortgage-backed securities (MBS). Key differences between MBS and ABS include their trading durations and the types of receivables backing them.

1. What is
Securitization?

2. Securitization is the process conversion of
receivables and cash flow generated from a
collection or pool of financial assets like
mortgage loans, auto loans, credit card
receivables etc into the marketable securities.
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4. Asset securitization is the process whereby
interests in loans and receivables are packaged
and sold in the form of ABS asset backed
securities.
Asset Securitization
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”

5. Parties involved in securitization

6. Typical Securitization Structure

7. Must Know Concepts in
securitization

8. Asset back securities (ABS)
Collateralized debt obligation
Mortgage-backed securities (MBS)
Collateralized Mortgage Obligations

9. Asset back securities (ABS)
Asset-backed securities are the bonds or notes
backed by some financial assets. These assets
consist of receivables such as mortgage loans,
credit card receivables, auto loans,
manufactured-housing contracts and home-
equity loans.

10. Collateralized debt obligation
It is an investment grade security backed by a pool of various
other securities.
Mortgage-backed securities (MBS)
Mortgage-backed securities are bonds that are backed by pools
of mortgage loans. Examples Mortgage papers, house papers,
land and Property papers.

11. Collateralized Mortgage Obligations (CMO)
The CMO is a multiclass bond backed by a pool of mortgage pass-
through or mortgage loans.

12. Difference between MBS and ABS
No. MBS ABS
1 The Duration for
trading is more than 15
years.
The Duration for
trading is up to 5 years.
2 Securities: Mortgage
papers, house papers,
land and Property
papers.
Securities: Credit card
papers, Share
certificates, Auto or
vehicle papers.

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